A buyer looking at $500,000 houses in July would have seen their potential monthly payment fall by $177 in August, then rise by $328 since.

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Mortgage rates haven’t been this erratic since the late 1980s, making it that much trickier for homebuyers to set a plan and stick to it, a new analysis suggests.

Rates underwent more volatility during the three-month window ending Sept. 22 than in any three-month period dating back to the time of the Black Monday stock market crash of 1987, according to a Redfin analysis released Wednesday. 

This uncertainty has produced a treacherous environment for many buyers, who typically take weeks to go through the process of finding homes, making offers and securing financing for the purchase.

“The challenges homebuyers face in today’s market go beyond the dwindling affordability caused by high mortgage rates and home prices,” Redfin Deputy Chief Economist Taylor Marr said in the report. “The whiplash in mortgage rates between when homebuyers set their budget and when they make an offer is also making it extraordinarily difficult to plan ahead.”

Chart by Redfin

The impact is even more evident when viewed through the lens of a single homebuyer’s choice. 

Redfin’s report details the case of a hypothetical buyer in July who is casually scrolling through listings for $500,000 homes. By the time this buyer has an agent and is ready to start offering on homes in August, their potential mortgage payment has dropped by $177 per month as rates fall below 5 percent.

But by mid September, when this hypothetical buyer actually secures financing, that monthly payment has rebounded by $328 from its August low point as rates race back above 6 percent.

Chart by Redfin

A foundation this shaky can complicate anyone’s decision-making process, especially one as consequential as a home purchase.

But there’s a chance, at least, that rates will settle somewhere lower than their current levels sometime in 12 to 18 months — assuming the Fed’s inflation fight is largely successful, said Justin Dimler, a regional sales manager at Redfin’s Bay Equity mortgage company.

That means today’s buyers may be able to refinance at a lower rate in the future, and bring down their payment, he said.

Still, the present rates — now creeping up near 7 percent — are limiting the types of homes from which buyers can choose.

“I advise house hunters who qualified for a loan one or two months ago to get requalified by their mortgage adviser,” Daimler said in the report, “because the change in mortgage rates may mean they’re no longer eligible to borrow as much as before.”

Email Daniel Houston

homebuying | lenders
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