When mortgage rates climb, buying a home can start to feel like trying to hit a moving target. Every jump in rates makes monthly payments bigger, and that pushes a lot of buyers to look for another way in. More and more of them are finding it in the adjustable-rate mortgage , or ARM. The ARM Option Here’s how an ARM differs from a more traditional mortgage. With a regular fixed-rate mortgage , your rate stays the same for your whole loan. But with an ARM , your rate is locked for the first few years, then it can move up or down based on market conditions . Some people don’t like that level of uncertainty – and that’s okay. But others are drawn to this option specifically because there’s usually a lower rate to start when you opt for an ARM. And in an affordability-strapped market, that’s going to gain popularity. Bankrate recently found that, in September, rates for ARM products were over a full percentage point lower than a regular fixed-rate loan. Depending on the ARM product, that can make a difference of $150-300 in the monthly payment on a median-priced home. And for some buyers, that’s enough to turn “not right now” into “let’s do this.” You can see it in the numbers. Data from the Mortgage Bankers Association (MBA) shows that, in October, roughly 1 in 10 people applying for a mortgage chose an ARM (see graph below): 

Here's something most homebuyers don't think about. When the housing market slows down , homeowners and builders don't always respond the same way. Think about it. If you're selling your house and aren't getting the offers you want, you could make the choice to take it off the market and stay put, and wait for things to improve. But builders ? They may be more motivated to stay the course. They've already invested money in building those houses. And every completed home that sits unsold means money tied up in a property, plus ongoing costs that can add up. That's why some builders may be more motivated to negotiate right now. And that could work in your favor. Fewer Buyers Are Making Moves. And Builders Are Feeling It. You’ve probably seen the headlines. According to the latest report from the National Association of Realtors (NAR), pending home sales – homes that have gone under contract but haven't closed yet – fell 7.3% in September and 11.3% compared to last year. Why? Higher mortgage rates are making it harder for buyers to make the numbers work. Now, that report tracks existing homes, not new construction. But we're seeing signs of the same slowdown on the builder side, too. According to the National Association of Home Builders (NAHB), builder confidence dropped to 29 in October , its lowest level since June 2012. Traffic from prospective buyers also dropped to its lowest level in more than a decade, excluding the start of the pandemic.