(CBS News) It looks like the era of record-low interest rates is on borrowed time. Rates are starting to rise again. That's exactly what Wall Street feared would happen when the chairman of the Federal Reserve said the economy had improved enough for the Fed to ease back on one of its stimulus programs.
The Dow lost 559 points in the two days after that announcement, but it stabilized Friday and gained 41 points. And it's not just the stock market: higher interest rates are also affecting the housing market.
In Dumont, New Jersey, 30-year-old Jeremy McDonald decided he couldn't wait any longer to jump into the housing market
"And now that the prices are starting to trickle up a little bit, it's a good time to get in there 'cause I know the market's not going down anymore," he said.
Realtor Kelly Weber says in the past few months it's suddenly become a sellers' market.
"Actually they're starting to get over asking price," she said. "You're getting multiple offers on properties."
Weber says two forces are combining to drive up prices. "Inventory is low. You have buyers wanting to get in before rates start creeping further up, which is creating this frenzy."
Mortgages rates have already risen three-tenths of a point in just the past week. That's increased the payment on a $220,000 30-year fixed mortgage by about $38 a month to $1,080.
But Fed Chairman Ben Bernanke said this week that's a sign the economy is improving.
"If interest rates go up for the right reasons, that's a good thing," he said. "That's not a bad thing."
And higher rates could encourage banks to lend more, said mortgage industry analyst Ric Sharga.
"One of the biggest problems consumers have today is the unavailability of credit," he said. "It's very difficult to get a mortgage loan. As interest rates go up, it will [encourage] the bankers to make more of these loans and it should be easier for consumers to buy the home they want."
Despite the recent run-up, mortgage rates are still near historic lows. But the Mortgage Bankers Association forecasts the 30-year fix will hit 4.7 percent by the end of next year.