Why Rising Mortgage Rates May Trap You: Zillow CEO

Against the backdrop of increasing home prices and the prospect of much higher mortgage rates, it's a "great time" to sell, Spencer Rascoff, CEO of online real estate marketplace Zillow, told CNBC on Thursday. That is, if you can find a place to buy, he added.

"As mortgage rates inevitably come from 3 percent up to 5 or 6 percent, it's going to create problems down the road," Rascoff said in a "Squawk Box" interview.

The average rate for a 30-year fixed rate mortgage punched through the 4 percent level this week for the first time in a year, according to the Mortgage Bankers Association.

(Read More: Rising Rates Turn Investors Away From REITs)

"If you have any equity in your home and you're thinking about selling in the next couple of years," he continued, "[it's] probably best to sell now, even though home values are continuing to rise."

"Imagine yourself buying a $300,000 home today, and in four years you may want to trade up to a $500,000 home," he said. "That home is not just that much more expensive—but because mortgage rates are going to be higher—it's significantly more expensive. So the trade-up market is going to be very troubled in a couple of years."

"This is not today's problem," Rascoff added, saying today's real estate market problem is a "big supply-demand imbalance: huge demand driven by low mortgage rates and investor purchasing [of] distressed properties. But very limited supply."

The reason for the limited supply is that "44 percent of Americans with a mortgage are effectively in a negative equity position," he said. "Meaning if they sold their home, they wouldn't be able to clear their mortgage. They're basically trapped in their home and can't list."

"So very little supply and significant demand. That's driving price spikes," he said. "You've seen six months of greater-than-5-percent appreciation rates. It's the longest streak of greater-than-5-percent appreciation rates since the [housing] bubble."

Last week, the S&P/Case-Shiller 20-city home price index for March showed a 10.9 percent increase in housing prices from a year ago.

(Read More: Home Prices See Largest Annual Gain in Six Years)

"We're now seeing unsustainably high rates of appreciation," Rascoff said. "In Phoenix, in San Francisco, in Orange County and San Jose, [Calif.], 20-plus percent year-over-year appreciation. Far too high. We've come back too fast. It's concerning."

—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.