The housing market is slowing. It’s time for homeowners to sit tight.

Sorry if this is breaking news, but if you own your home, it probably isn’t worth as much as you think. House prices are falling as the Federal Reserve hits the brakes hard, jacking up interest rates to rein in painfully high inflation.

For most homeowners this isn’t a big financial deal — as long as they don’t plan to sell the house anytime soon. But it won’t feel good, particularly combined with the sharp decline in stock prices.

This is a dramatic turn. As recently as last summer housing was on a tear. Nationwide, house prices had soared more than 40% from when the pandemic first hit. Here in the Philadelphia region, prices didn’t rise as much; still, they increased by a substantial amount — close to 25%. There are only a few times in history that house prices have risen so far so fast.

However, the housing market has turned. Prices are dropping. And though the declines to date are still modest — only a few percentage points in most places, including Philadelphia — they are sure to intensify.

Surging mortgage rates are undermining housing demand and house prices. Powered by the Fed’s aggressive interest rate hikes, the average rate on a 30-year fixed rate loan is close to 7%, up from about 3% a year ago, to its highest in 20 years.

Those higher mortgage rates conflated with heretofore high house prices, crushing affordability. The typical household purchasing the typical home with a typical down payment now must shell out almost $2,100 a month on principal and interest payments. A year ago, that same family buying the same home could get a mortgage with payments of $1,100 a month. Most renters hoping to become homeowners don’t have a prayer. They simply don’t have the take-home pay to make those payments.

It also doesn’t make economic sense for most existing homeowners to move to another home. Many homeowners took advantage of rock bottom rates when they were available and refinanced for mortgages with rates about 3.5%. A family would see their rate double if they sold their current house and got a new mortgage.

Adding to the slide in housing demand are housing investors, who have stopped buying. Big institutional investors that were scarfing up tracts of homes to rent them out know they will get a better deal if they sit tight. And flippers who purchase homes with the intent of quickly selling for a fast buck fled the market.

House prices are coming back to earth surprisingly quickly. Typically, it takes awhile for home sellers to cut asking prices, because psychologically they don’t want to give up on the highest Zillow price they’ve seen for their homes. They’d usually rather pull a home off the market and wait for conditions to turn around. Not this time. Some homeowners are caving. They understand that potential buyers can’t afford the listing price, and unlike when rates rose in times past, they know those rates are unlikely to come down anytime soon.

So, buckle in. If mortgage rates remain about where they are through this time next year and the economy skirts recession, then national house prices appear likely to fall about 10% peak-to-trough. Most of the declines will happen sooner rather than later, but prices won’t start to rise again in earnest before mid-decade. And if there is even a modest recession, house prices will fall closer to 20%.

This is consequential, but even if prices fall 20%, they’d only retrace half the pandemic-era price gains. And over the first half of this decade, they still will have risen about 4% a year. Not bad, considering that would be consistent with the growth in household incomes.

Worries that house prices will crash as they did in the financial crisis of 2007 to 2009 are overdone. That would happen if there were lots of foreclosures and distressed sales at substantially discounted prices. But most home buyers since that crisis passed have high credit scores, and they’ve taken on plain-vanilla, 30-year fixed rate loans — not the two-year exploding subprime adjustable-rate mortgages that were ubiquitous in the lead-up to the crash.

We can also take solace in that Philly-area house prices should hold up better than in most other places. That’s because housing is much more affordable here than in other geographic areas, even with the recent run-up in prices. Affordability here is a big problem, but it’s even worse in many other parts of the country.

Having said all this, the coming house price declines won’t be pleasant, particularly when combined with the decline in stock prices. We are a lot less wealthy than we were a year ago, although we probably were never as wealthy as we thought.

Mark Zandi is chief economist for Moody’s Analytics.