Mortgage rates are on the rise and hurting buyers. Here’s what you need to know if you plan to buy a home this year.

The worst of all possible confluences for home buyers got a bit worse this week: Mortgage interest rates jumped up again, to the highest level in five years. At the same time, home prices are rising way faster than the 2 percent inflation rate the U.S. hit in the past quarter.

The Federal Reserve is expected to raise the federal funds rate at least twice more this year. While that will affect auto loan and credit card rates more than mortgages (which are based on the price of 10-year bonds), that doesn’t mean mortgages rates will stay still.

According to Danielle Hale, chief economist for Realtor.com, mortgage rates are rising due to changing market expectations and the one-quarter percentage point rise in 10-year Treasuries. “Strong growth, rising inflation, expected increases in short-term rates and government borrowing are setting the stage for higher long-term rates, and mortgage rates will follow suit,” Hale said.  

Realtor.com currently forecasts rates will approach 5 percent by the end of 2018, an increase of 50 basis points over current rates or an extra $800 in mortgage payments each year. To keep mortgage payments the same, a household would need to borrow 5.5 percent—or $12,400—less when financing the typically priced home listing. That puts added financial pressure on home buyers who are already grappling with rising prices,” Hale added.

And home prices are surging. According to this month’s Core Logic Home Price Index, home prices rose 7 percent in a March, on a year-over-year basis, and were up 1.4 percent from February 2018 to March 2018.  In addition, CoreLogic Market Conditions Indicators (MCI) data shows that 37 percent of metropolitan areas have an overvalued housing market as of March 2018. (Based off of the 100 largest metro areas housing stock.) and the national home-price index is projected to continue to increase by 5.2% on a year-over-year basis. All 50 states gained value year-over-year in March.

But the gains aren’t evenly distributed, and they don’t all mean the same thing. For example, prices rose more than 12 percent in the Las Vegas metropolitan area, which has been deemed overvalued, while home prices rose 10 percent in San Francisco, a metro area deemed fairly valued. Home prices in Illinois rose 2.6 percent, year-over-year, while prices fell on the North Shore of Chicago, the location of some of the priciest homes in the state. (Some homeowners are selling for less than they paid for their homes 15 years ago.)

Although prices are rising, fewer homeowners are selling, which is putting even more upward pressure on home prices. Rising mortgage rates aren’t helping. I predict a much more expensive home buying experience for Millennials, who are now the majority of the market.

If you’re buying a home this year, you need a copy of my new book, 100 Questions Every First-Time Home Buyer Should Ask.