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 Geren's took provides a fixed interest rate for the first 5 years, after which it switches to an adjustable interest rate for the remainder of its term. Depending on the interest-rate climate then, 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.

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Mortgage rates in 2023

In July, when the Green's 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 NAR.

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.

“So he’d stay back in the city for two nights,” she says. “We had to move to maintain our family unit.”

Housing inventory and home prices

Geren noticed that homes were flying off the market even as the mortgage rates were going up due to a lack of inventory.

Total housing inventory at the end of August was 1.1 million units, down 0.9% from July and 14 % from one year ago (1.28 million), according the realtors’ association.

In May, they bid on a home listed for a little more than $955,000 the day it went on the market. The offer was verbally accepted but the seller’s agent got back to them the following day saying there were others willing to offer more. The couple ended up offering $15,000 more than the initial offer and close to $10,000 above the listing price to secure the contract at $965,000.

Stacy Levy, the couple’s realtor, says the lack of inventory is keeping the home prices high.

“There's more buyers than sellers,” says Levy. “It’s still a seller’s market.  If you price your house sharply, you get multiple people interested and they drive the price up. But if you price it too high, it just sits.”

One silver lining for the Geren’s was the equity they’d accumulated over the pandemic years in their Connecticut home.

They’d bought their 7-bedroom home on 13 acres for $500,000 in 2017. The were able to sell it for $825,000 earlier in the year.

Although the new home is about 1,300 square feet smaller than the old one, Geren’s commute to the city by express train only takes 45 minutes.

For others who don’t have a pressing need to move, giving up a low mortgage rate is a big issue.

One reason for the limited supply of homes has been the sub-5% mortgage interest rates that 85% of current mortgage holders are locked in to, which discourages current homeowners from selling their home and buying another at today’s elevated interest rates.

Unless they can sell the exiting home for a tidy profit and move to low-cost area where they can finance most of the mortgage with cash, people are not interested in relocating says Levy.

“That’s why we have such low inventory,” she says. "It's hard to be a buyer now, especially if you are a first-time buyer."

For Jessica Geren, taking an adjustable-rate mortgage is worrisome, but the best they could do given the high mortgage rates.

"We expect to refinance it but this was the best option at the moment for us," she says.

Swapna Venugopal Ramaswamy is the housing and economy reporter for USA TODAY. Follow her on Twitter @SwapnaVenugopal