We entered this year with a few bold predictions from economists and industry experts, including Brian Buffini, but the hikes in mortgage interest rates over the past few weeks took all of us by surprise. Initially, it was predicted that rates would hit 4% by the end of 2022. Here we are with the busiest time of the year just kicking off, and rates have surpassed 5%. So how do rates and tight inventory make for a summer market? Read below for our insights and the best seller and buyer tips we can provide based on our experience.

1. INCREASING RATES = DIMINISHING AFFORDABILITY

For first-time home buyers, the costs of buying the same home this year compared to one year ago have increased by 40% due to higher home prices and higher mortgage rates, says Lawrence Yun, chief economist of the National Association of REALTORS. Simply put, for every 1% increase in interest rates, buyers lose about $10,000 of buying power.

2. LESS COMPETITION

As rising interest rates knock many would-be buyers out of the market due to non-affordability, there will be fewer buyers to compete with for the same home. In the spring of 2021, nationally the average number of offers on a home was about five, according to Fool.com. In a typical market, a home is expected to receive two to three offers. This summer, a well-marketed home can expect three to four offers.