The market is favorable for sellers despite rising mortgage rates

Jessica Guerin and her husband Matt exchanged their 2.75% mortgage for a 5.5% floating rate mortgage in July when they sold their home in Ledyard, Connecticut to buy a new home in Croton, New York.

5/1 ARM mortgage loan with floating interest rate

The

5/1 ARM floating rate mortgage loan that the Guerens have chosen provides a fixed interest rate for the first five years, then switches to a floating interest rate for the remainder of the term. Depending on the market interest rate environment in the future, the mortgage could become more expensive.

The couple said it was the only way things would come together. While most home buyers and sellers remain on''place (home sales were down 15% in August from a year ago, according to the National Association of Realtors), they are deciding to move despite high prices and rising interest rates. They, like many others, are moving as the opportunity to work remotely disappears in many sectors. Others are moving to cheaper neighborhoods, using the proceeds from the sale of their previous home to circumvent high interest rates. However, for first-time buyers, this remains one of the most challenging times to enter the real estate market.

According to Freddie Mac, the interest rate on a 30-year fixed mortgage reached 7.3% by the end of September 2023, the highest level since 2000. At the same time, prices on''s homes continue to rise, climbing 4 percent from a year ago to $407,100, marking the third straight month that the median sale price has exceeded $400,000, according to the National Association of Realtors.

The Guerin family also agreed to let the sellers stay another month, renting out the house to them to draw attention among other potential buyers. "We had three weeks with five kids and no house," said Guerin, a part-time college instructor at various local colleges. "We spent a week in Mexico, then we visited my sister in Washington, DC. Then we traveled to Ohio to visit my parents. It was one of the most exhausting experiences of my life. "

But Guerin was ready to go to''Compromise. She had been watching and studying the Westchester County market since it became clear that her husband's remote work would be over. He started a new job in finance during the pandemic and initially worked completely remotely. Last year, her husband's employer began requiring employees to return to the New York office three times a week. Their old home in Connecticut, which is near the Rhode Island border, is a 3.5-hour drive. "So he would stay in town for two nights," she says. "We had to move to keep our family together. "

Jessica Guerin has noticed homes disappearing from the market despite rising mortgage rates due to a lack of supply.

The total number of offers on the housing market by the end of August was 1.1''million units, down 0.9 percent from July and down 14 percent from a year ago (1.28 million), according to the Association of Realtors. In May, they bid on a home that was listed for sale for a little more than $955,000 on the day it hit the market. The offer was verbally accepted, but the seller's agent got back to them the next day saying there were other buyers willing to offer more. The couple closed the deal for $965,000, adding another $15,000 to the original bid and about $10,000 over the initial price.

The family's realtor, Stacey Levy, says the lack of supply is keeping home prices high. "There are more buyers than sellers," Levy says. "It's still a seller's market. If you price your home right, you attract a few interested'''persons, and they raise the price. But if you put too high a price on it, it's just worth it. "

One of the pluses for the Guerens was the experience they had during the pandemic, saving extra money from the sale of their Connecticut home. In 2017, they bought their seven-bedroom home on 13 acres for $500,000. Earlier this year, they were able to sell it for $825,000. Although the new home is 1,300 square feet smaller than the old one, Matt Guerin's commute to the city by express train only takes 45 minutes.

For others who don't have an urgent need to move, the rejection of a low mortgage interest rate is a big problem. One reason for the limited supply in the housing market is mortgage interest rates, which are now held by 85% of mortgage holders,''which discourages owners from selling their homes and buying others at today's high interest rates. The only way to sell an existing home at a good profit and move to a low-cost neighborhood where you can finance the bulk of the mortgage with cash is to sell the home at a high price, Levy says. "That's why we have so few offers," she says. "It's hard to be a buyer right now, especially if you're a first-time homebuyer. "

Jessica Guerin admits that a floating-rate mortgage is a concern, but it was the best option for them with current high interest rates. "We plan to refinance our mortgage, but this was the best choice for us at this time," she says.