Mortgage rates are at their highest in years and expected to go higher, but Massachusetts brokers and sales agents say fiscal policy is currently only a small part of the issues impeding would-be buyers from landing a deal.

Concerns of not enough supply and overwhelming demand still dominate residential real estate conversations from Pittsfield to Provincetown.

That doesn’t mean Realtors are ignoring the threat of interest rates going higher and what that could mean for home sales in the Bay State – particularly for first-time homebuyers and those looking for a less expensive place to live.

“I see it becoming the headwind, and everybody else will see that as well soon,” said Melvin Vieira, 2022 president of the Greater Boston Association of Realtors and an agent with RE/MAX Destiny. “I’m that guy who’s looking over the horizon going, ‘There’s something coming.’”

First-Timers Most at Risk

The average interest rate on a 30-year fixed rate mortgage in the U.S. approached 5 percent last week, up from the sub-3 percent range seen last fall, according to Freddie Mac. Low interest rates fueled a massive wave of demand for homes and inspired first-time homebuyers to make the jump from renting to owning.

Those buyers are likely to be the first impacted from the rise in rates. This means a buyer who may have been paying $1,200 a month at a 3 percent mortgage is now facing a $2,000-per-month payment. That’s a hefty jump for more price-constrained buyers or those only used to smaller rent increases.

Viera has already noticed a slowdown in viewings at condominiums priced at $600,000 and below in East Boston.

“It takes that pool of buyer and moves them to either a different number or area,” Vieira said. “Now they have to open up their range of where they’re going to look.”

Other brokers and agents aren’t ready to ring the alarm bell on rising interest rates, but they are advising clients to pay attention. Some are even advising clients to consider putting their homes on the market sooner than later in the event of a softening market.

“Most people are trying to say sooner rather than later because interest rates are going to go up,” said Kathleen McSweeney, president of the Realtor Association of Central Massachusetts and a broker associate at Lamacchia Realty. “But we’re also advising all our buyers to reconnect with their loan officers just to make sure the pre-approval they may have received several months ago is still valid because that could have changed.”

Meg Steere, a Greater Boston sales associate with Berkshire Hathaway HomeServices, focuses on sales under $2 million and still had multiple bids on each of the three properties she took to market in the last two weeks.

“What I am seeing from the buyer side is that interest rates going up has sparked sentiment more like, ‘Okay, we want to go ahead and find a place before rates go higher,” Steere said. “On the seller side, I’m certainly talking about how now is the perfect time to do it. We don’t know how inflation as well as global events and interest rates going up will affect things, but it will. Why not take advantage of right now? It is this golden period to put your house on the market.”

Sales Totals Off Downtown

There are signs of some softening across the state but not a massive slowdown, according to sales data from The Warren Group, publisher of Banker & Tradesman.

Boston’s urban core – encompassing the Back Bay, Chinatown, Fenway, Financial District, Mission Hill and the North and South End neighborhoods – saw a 26 percent decline in the number of condo sales through February compared to the first two months of last year.

The single-family sale total in Springfield dipped a little more than 4 percent from this time last year, but it’s still only eight less than the 184 sales seen in 2021. Worcester’s 156 single-family home sales total so far this year is just one down from this time last year.

“We do have supply. It’s just moving quickly off the market,” said Cheryl Malandrinos, a broker associate at Berkshire Hathaway HomeServices and president of the Realtor Association of Pioneer Valley. “Because it’s moving so quickly off the market, we need more to replenish it, and housing production has lagged.”

On the Cape, Tight Supply Remains

The main real estate headwind for Cape Cod, Nantucket, and Martha’s Vineyard has more to do with a severe lack of supply. That’s the chief obstacle to overcome before rising interest rates even enter the conversation, sales agents there say. A flood of second homebuyers drove a surge in home prices across the region, and it has severely zapped the pool of available supply.

There were 388 homes for sale on the Cape and Islands at the end of last year, according to the region’s multiple listings service. That’s down from the 859 homes for sale at the end of 2020 and well below the 2,069 seen at the end of 2018.

Rising interest rates won’t help buyers at more affordable ends of the housing spectrum on the Cape, but these buyers were already getting priced out of the market, said Nichole Willey, a Cape and Islands-focused broker associate at Keller Williams.

“Interest rates are changing, but the demand isn’t changing,” Willey said. “People still need a place to live, and there are still no places to move to. People are not listing their homes because they don’t have a place to buy.”