No it hasn't become more expensive due to hitting 5%, though it may be more expensive for other reasons. The market will equilabrate.

There's a couple who live at the peak of the bell curve that defines your market. They can spend $X,000 per month on a house. 2.5% vs 5% just changes how much of their money goes to paying down principle vs the interest. With that the price of the house will fluctuate to account for this reality.