How will fed rate rise affect real estate market?

By far, one of the biggest questions that stakeholders of the real estate market have in mind is how much fed's rate imminent hike will affect real estate market.
It is well known in the investing world that Federal Reserve has maintained the reference rate at a near-zero level since the last market crush in order to recover the U.S economy, alongside with the three quantitative easing programs, which stopped on October 2014 and accumulated a total of $4.5 trillion in assets. Most economists agree these decisions helped mitigating the crisis, but they also say that these low interest rates has to be normalized anytime soon as risks of market bubbles appears.

Classic theory states that higher interest rates result in lower general economic activity, as the cost of both producing and consuming raise when financing cost raises. Mortgage rates also increase, so there is no doubt real estate activity will be affected as well, dropping both prices and offer/demand forces. Anyone can’t lie about that.

Seems bad. Is there a bright-side?

Yes, but in the long-term. Again, conventional economic theory may answer that question.
Higher interest rate increase dollar value. This appreciation takes place because saving in a strong and higher yield currency becomes more attractive to individuals, investors and large institutional agents. This, in hand, raises maybe not the "price" but the "value" of goods (cars, lands, homes, etc.) relative to other currencies. From the investor perspective, it is the currency appreciation not the price that's capitalizing your money. This benefits home owners and landlords…and future landlords. Wise investors with cash liquidity aware of that facts may take advantage of short-term downtrends produced by offer and demand constriction making better of an eventually quiet market. Just take an overall look of the historical increasing prices in the last forty years despite all crisis and and recessions in modern U.S history (except the last which was produced in fact by a real estate bubble)

Additionally, as economy recovers, several forces tend to have in the long term a good impact on the housing market: increase in employment, stability of jobs, higher income level and purchasing power. Sometimes I’ve read economists pointing mortgage rate hiking like if it was a total catastrophe. Well, if you have a job, no rise in rates is worse than losing it, no matter if your are taking a long-term loan or refinancing your house.

But wait! There’s more!

Fly to quality comes in our rescue! It’s a kind of technical definition. Here’s what Investopedia states about: “The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This flight is usually caused by uncertainty in the financial or international markets.
However, at other times, this move may be an instance of investors cutting back on the more volatile investments for the conservative ones (i.e. diversifying) without much consideration of the international markets”.

Again, it applies to real estate market too. Currency appreciation and higher returns in treasury bills and government bonds turn local capitals to be safer than overseas and emergent markets investments. Foreign investors are more prone to put their money here rather than in their own countries. Also the second paragraph of the definition above comes into play: volatile markets like stocks market move against interest rates. If the latter goes up, the former goes down. This causes investors to sell-off their stocks and direct their money from riskier investments to conservative ones, like saving accounts, bonds, T-bills, and of course, real estate properties.