How much would raising rates cool off the housing market?

Mortgage interest rates have increased over a full percent in just the last 2 months and we are still dealing with unbridled housing demand. This begs the question I think we're all asking...how high would rates have to go to reduce home-buying demand, thus reining in home prices?

This Bloomberg article click here has a few interesting nuggets...one of which gives us the following insight: "Raising interest rates high enough to put a dent in the housing market would throw the rest of the U.S. economy into recession first. We don't have, or aren't willing to use, policy tools that would cool off housing demand while leaving the rest of the economy unaffected."

Another interesting concept is the last sentence in the article regarding how the housing prices are contributing to inflation.