Jessica Geren and her husband, Matt, traded in a 2.75% mortgage rate for a 5.5% adjustable-rate mortgage in July when they sold their home in Ledyard, Connecticut, to buy a new home in Croton, New York.
The 5/1 arm adjustable-rate mortgage loan the Gerens took provides a fixed interest rate for the first five years, after which it switches to an adjustable interest rate for the remainder of its term. Depending on the interest-rate climate in the future, it could get more expensive.
That was the only way the couple said they could make the math work.
As most homebuyers and sellers are sitting on the sidelines (home sales dropped 15% in August from one year according to the National Association of Realtors), the couple is wading in, despite the painful combination of high prices and rising interest rates.
They, like some, are moving as the option to work remotely evaporates in many sectors. Others are moving to lower-cost areas, using the equity in the former house to circumvent high interest rates. But for first-time buyers, it remains one of the most challenging times to enter the housing market.
Mortgage rates in 2023
In July, when the Gerens were closing on their home, the 30-year fixed-rate mortgage stood at 6.8%. And it has been climbing up since.
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At 7.3% the week ending Sept. 28, the 30-year fixed-rate mortgage hit the highest level since 2000, according to Freddie Mac. Meanwhile, home prices continued their upward trajectory climbing 4% from one year ago to $407,100 – the third consecutive month the median sales price surpassed $400,000, according to the National Association of Realtors.
The couple also agreed to let the sellers stay for another month by renting the home back to them as an incentive to stand out from the rest of the interested homebuyers.
“We had three weeks with our five kids and no home,” says Geren, an adjunct college professor at various local colleges. “We went to Mexico for one week and then we went to Washington, D.C., to visit my sister. And then we went to Ohio to visit my parents. It was one of the most exhausting things I've done in my life.”
But it was a compromise Geren was eager to make.
Return to office mandate
She’d been watching and studying the Westchester County market ever since it had become clear that her husband’s work-from-home routine was about to end. He’d started a new job in finance during the pandemic and had initially been fully remote.
Last year, her husband’s employer began requiring employees to return to the office in New York City three times a week. Their old Connecticut home, close to the Rhode Island border, was 3.5 hours away.