While home prices are responding to higher mortgage rates, there is "little evidence of a housing bubble that is about to burst," according to a new report from Moody's Analytics.

The lowest tier of the housing market appreciated by 17.2% in the past year alone, placing an extreme burden on first-time buyers. And as the Federal Reserve continues quantitative tightening and interest rate hikes, mortgage rates have ticked up sharply already in 2022, and are now more than 2.5% higher than the lows to which the American homebuying public had grown accustomed.

"Climbing mortgage rates, coupled with already unaffordable housing, especially for first time buyers, will finally crack housing demand," Moody's analysts note in a new whitepaper. They say the "extreme price gains" observed last year have led to housing prices that are 21% overvalued by the end of 2021. By way of contrast, homes were 24% overvalued at the peak of the housing bubble.