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Housing prices are on a roll. Will a rate hike change that?

The housing market has been in a long, slow recovery, and the Federal Reserve has kept interest rates near zero for about seven years.

Both dynamics, however, could be about to change. With the central bank all but certain to begin withdrawing some of its massive stimulus within the coming months, the recovering housing sector could be in for a change.

"The Fed is keen on not shocking the system," said Svenja Gudell, Zillow's chief economist. "I don't think we'll see rates jumping up tremendously, we'll see them growing over time," Gudell said in an interview with CNBC's "On the Money."

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Whatever the case, home values are growing at the fastest pace since November of last year, according to Zillow data, up 4.3 percent.

Perhaps sensing an impending end to the era of ultra-loose monetary policy, homeowners may be responding in kind, and defying the slowdown in the global economy.

"We're seeing home value appreciation still at a very robust rate. The problem right now is low inventory and that's really driving up these home values," said Gudell, who leads the real estate website's economic and data analysis of the U.S. housing market.

Yet how will buyers and sellers respond if the Fed does go ahead and raises rates at next month's meeting?

"It's tough for buyers now in general. For most people right now it's a seller's market," said Gudell, who called the market "extremely competitive." Buyers are "putting in multiple offers. It's hard finding an available house out there," she said.

Gudell says while the "middle of the country is a bit more relaxed," the housing recovery has been propelled by a few "hot markets," specifically cities like Denver, Dallas, Seattle and the Bay Area.

"A lot of first-time homebuyers are relocating because that's where the jobs are. You're moving to San Francisco, you're moving to Seattle, you're moving to Denver following the jobs," she said. "That's where you're going to buy your first home and that's where it's so tough."

Recently, the Zillow Home Value Index found home values in Denver and Dallas have soared by at least 16 percent in the last year, although Zillow classifies Denver as a "cool" buyer's market. San Francisco prices rose nearly 15 percent (earning it a "very hot" label), while San Jose jumped 10 percent. Seattle was up nearly 13 percent year over year — also a "very hot" label.

For context, the national median home value is $180,800. Yet in San Francisco, that figure is $764,600 — more than quadruple the national average. But Gudell says if interest rates do rise, even the "hot markets" will be impacted with possibly slower home price appreciation.

"I do think it will cool off some markets. The markets we'll see first cooling are the coastal markets, so San Francisco and Seattle, where homeowners are already stretching their dollars to be able to make monthly payments," she said.

"That's where home values could essentially go flat or we might even see some declines." The reason? Gudell suggested that "you can't spend much more on a home once your buying power is reduced so much by higher rates."

Still better than renting?

Real estate sale pending
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Still, she thinks now is a "good time to buy so if you can, you should, because rental rates are so high, so financially it makes a lot of sense." Gudell added that paying a mortgage is more affordable than renting.

But prospective buyers in those in–demand cities could be dealing with high rents, while at the same time trying to save for the down payment as home values keep climbing.

"One of the major hurdles right now for renters trying to become homeowners is saving for that down payment, qualifying for a mortgage" said Gudell. Then comes what might be the toughest part of the whole process.

"Actually finding a home."

"On the Money" airs on CNBC Saturday at 5:30 am ET, or check listings for air times in local markets.