(CNN) — Investors are getting spooked that the Federal Reserve’s aggressive interest rate hikes could damage the U.S. economy (just look at Tuesday’s selloff).

One area of growing concern: housing. Interest rate hikes can lead to higher mortgage rates, which could cause people to think twice about buying a home.

So far, sales are slipping, while prices are holding steady. But some economists warn continued historic rate hikes by the Fed could risk crashing the housing market, underscoring the difficult task ahead for the central bank.

What’s happening: According to Tuesday’s Consumer Price Index report, housing costs rose 0.7% in August and are up 6.2% year-over-year, the largest increase since 1991.

That increase was largely responsible for August’s higher-than-expected pace of inflation. Combined with a tight labor market, those high prices give the Fed reason to continue to go hard at its policy meeting next week and beyond, Marvin Loh, senior strategist at State Street, told me.

The Fed needs to see housing costs ease by about half a percentage point to reach its ultimate inflation goal, Loh added.

The job won’t be easy. Housing prices can remain stubbornly high, even as the Fed works to counteract them.

Housing prices are “the type of sticky inflation that will not ease anytime soon,” Joseph Brusuelas, chief economist at RSM US, told me. “It’s why the Fed will need to demonstrate a show of resolve by increasing the policy rate by 75 basis points at its September meeting despite the encouraging declines in transportation and energy.”

The risks: Some economists are noting weakness in the housing market starting to peek through. Home sales declined in July for the sixth month in a row. Housing starts, a measure of new home construction, also plunged that month as the cost of building supplies remained high and prospective buyers were priced out of the market.

So should the Fed keep up its historic hikes? The central bank must walk a careful line — a housing slowdown has preceded nine out of the past 12 recessions, and investors haven’t forgotten America’s catastrophic housing crisis in 2008.

Keep in mind: Although there are some reasons to suggest the CPI report on housing lags what’s actually going on in the market, and that housing prices could already be on their way down, we’re nowhere near a market collapse.

Still, Federal Reserve officials will face a tough decision in the coming months. Do they use the housing market’s resilience as a mandate to push forward with aggressive rate hikes and risk a crash?

Utah Housing Market Insights:

Dejan Eskic with the University of Utah’s Kem C. Gardner Policy Institute said the rapid uptick and fluctuations in interest rates this summer has created buyer uncertainty and hesitation.

“Especially for those buyers that are on the fence of affordability,” Eskic said. “One week they can qualify for a mortgage, the next week they can’t—depending on if their rates aren’t locked in.”

He said new buyers and move-up buyers are sitting on the sidelines because 80% of mortgages in Utah currently have rates at 4% or lower.

“In what world would you want to get rid of your low-interest rates if you’re not totally dissatisfied with your current housing? So the incentive to move right now for a lot of existing homeowners is just not there,” Eskic said.

Realtor and homebuilder Jed Nilson said it normally takes the housing market about three months to settle into a jump in interest rates.

“The higher interest rates combined with what home prices have done over the last couple of years have caused people to pause,” Nilson said, who is the incoming president for the Utah Association of Realtors.

He said the higher mortgage rates will shine a light on the lack of affordability housing in Utah.

“Each local government is going to have to look at it and say, ‘Wow. Because of what we’re not allowing to be built in our community, the ability for our children and grandchildren to purchase homes in our same town is going away,’” Nilson said.

Americans should prepare for a heating bill shock this winter

Gas prices are easing in the U.S. But winter is coming and the CEO of Chevron, one of the world’s largest energy companies, is warning that relief at the pump could soon be offset by sweat-inducing heating bills.

Chevron Chairman and CEO Mike Wirth said in an interview with CNN’s Poppy Harlow “there’s certainly a risk that costs will go up” for American consumers.

Wirth is not predicting a rise of the magnitude seen in Europe, where natural gas prices have skyrocketed as Russia has limited exports, reports my colleague Paul R. La Monica.

But in an interview that aired Tuesday, Wirth warned that U.S. prices could be “significantly higher” this winter.

Oil prices are still up more than 15% so far this year. That has helped boost sales, earnings and the stock prices of companies like Chevron. Shares of the oil producer are up 36% year-to-date, while the broader S&P 500 is 17.5% lower.

Wirth acknowledged that his company is making large profits while Americans struggle.

“I recognize that high energy prices are difficult for consumers. That’s why we’ve talked about increasing production, trying to increase supply to markets in a commodity business,” he said. “You go through these cycles. Two years ago, we were losing billions of dollars a quarter. Now we’re making strong profits.”

Bearish investors flock to cash

In more doom and gloom on Wall Street, pessimistic fund managers are selling stocks and piling into cash, according to a Bank of America survey published Tuesday.

“Investors’ perception of the outlook for the global economy remains bleak in September,” Michael Hartnett, Bank of America’s chief investment strategist, wrote in the report, which surveyed 212 fund managers with more than half a trillion dollars of assets under management in September.

About 72% of respondents expected a weaker economy in the next 12 months, up 5 percentage points from August. The share of investors saying recession is likely also increased in September to 68%, the highest since May 2020.

Unsurprisingly, Wall Street is bracing for corporate profits to soften and equities to continue to crash, the survey showed. The cash levels investors are holding jumped from 5.7% last month to 6.1%, their highest level since the September 11 attacks in 2001.

Up next

The August Producer Price Index, another key measure of U.S. inflation, is released at 8:30 a.m. ET.

Join CITIZEN by CNN at 2 p.m. ET for a panel on inflation, jobs, and the economy featuring reporters Paul LaMonica, Phil Mattingly, Christine Romans and Vanessa Yurkevich. RSVP here.

Coming tomorrow: Attention will turn to a meeting between Russia’s Vladimir Putin and China’s Xi Jinping.

KSL TV Ladd Egan contributed with Utah mortgage rates. 

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