Buying a Home in a Hot Housing Market: How One Family Did It
Mandy and Jordan Pichiottino spent nine months looking for a home in the Atlanta suburbs. Here’s how they beat others to get their dream home.
Andrea Kramar, USA TODAY
Jessica Geren and her husband Matt traded a 2.75% mortgage rate for a 5.5% adjustable rate mortgage in July when they sold their home in Ledyard, Connecticut, for a new home in Croton, New York buy.
The 5/1 ARM adjustable rate mortgage loan the Gerens took out offers a fixed rate for the first 5 years, then switches to a variable rate for the remainder of the term. Depending on the interest rate climate, it could then become more expensive.
The couple said that was the only way the bill could work.
With most home buyers and sellers taking a wait-and-see approach (according to the National Association of Realtors, home sales fell 15% in August from a year ago), the couple is marching in despite the painful combination of high prices and rising interest rates.
They, like some others, are moving as the ability to work remotely disappears in many industries. Others move to lower-cost areas and use the equity in their former home to avoid high interest rates. But it remains one of the most difficult times for first-time buyers to enter the property market.
Mortgage rates in 2023
In July, when the Greens finalized the purchase agreement for their house, the 30-year fixed-rate mortgage was at 6.8%. And things have been looking up since then.
Housing: Except in these three metropolitan areas, first-time buyers must earn more to afford a home
According to Freddie Mac, the 30-year fixed-rate mortgage hit its highest level since 2000 at 7.3% in the week ended September 28. Meanwhile, home prices continued their upward trend, rising 4% from a year ago to $407,100 – the For the third consecutive month, the median sales price exceeded $400,000, according to NAR.
The couple also agreed to let the sellers stay for another month by renting the house back to them to create an incentive to stand out from the rest of the interested home buyers.
“We had three weeks with our five children and no home,” said Geren, an adjunct college professor at several local colleges. “We traveled to Mexico for a week and then went to Washington, DC to visit my sister. And then we drove to Ohio to visit my parents. It was one of the most stressful things I’ve done in my life.”
But it was a compromise that Geren was determined to make.
Mandate to return to office
She had been watching and studying the Westchester County market since it became clear that her husband’s work-from-home routine was about to end. He had 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 City office three times a week. Her old home in Connecticut, near the Rhode Island border, was 3.5 hours away.
“So he stayed in town for two nights,” she says. “We had to move to maintain our family unit.”
Housing stock and property prices
Geren noted that despite rising mortgage rates, homes were disappearing from the market due to a lack of inventory.
According to the Real Estate Agents Association, total housing inventory at the end of August was 1.1 million units, 0.9% less than in July and 14% less than a year ago (1.28 million).
In May, they bid on a home that was listed for just over $955,000 on the day it went on the market. The offer was verbally accepted, but the seller’s agent contacted him the next day and told him there were others willing to offer more. In the end, the couple bid $15,000 more than the original offer and nearly $10,000 over the list price to secure the $965,000 contract.
Stacy Levy, the couple’s real estate agent, says the lack of inventory is keeping home prices high.
“There are more buyers than sellers,” Levy says. “It’s still a seller’s market. If you set a high price for your home, you will attract the interest of several people who will drive up the price. But if you set the price too high, it just sits.”
One bright spot for the Gerens was the equity they had accumulated in their Connecticut home over the pandemic years.
They bought their seven-bedroom home on 13 acres in 2017 for $500,000. Earlier this year they were able to sell it for $825,000.
Although the new home is about 120 square meters smaller than the old one, Geren’s express train ride into the city only takes 45 minutes.
For others who don’t need to move urgently, missing out on a low mortgage rate is a big deal.
One reason for the limited home supply is the sub-5% mortgage rates that 85% of current mortgage holders are locked into, discouraging current homeowners from selling their home and purchasing another at today’s elevated interest rates.
Unless they can sell the abandoned house for a decent profit and move to a low-cost area where they can finance most of the mortgage with cash, people aren’t interested in moving, Levy says.
“That’s why we have such low inventory,” she says. “It’s hard to be a buyer now, especially if you’re a first-time buyer.”
For Jessica Geren, taking out a variable-rate mortgage is worrisome, but given the high mortgage rates, it’s the best thing she can do.
“We expect to refinance, but this was the best option for us at the moment,” she says.
Swapna Venugopal Ramaswamy is the real estate and business reporter for USA TODAY. Follow her on Twitter @SwapnaVenugopal