Sky-High Down Payments Hit Homebuyers’ Wallets: A Record-Breaking Shockwave

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SEATTLE, WA — In June, the typical down payment for U.S. homebuyers reached a new record of $67,500, marking a 14.8% increase from $58,788 the previous year, according to a recent Redfin report. This rise represents the 12th consecutive month of year-over-year growth in down payments, significantly outpacing the 4% increase in home prices during the same period.

The surge in down payments is largely driven by the demand for higher-priced, ready-to-move-in homes in desirable areas. Buyers are increasingly opting to put down a larger percentage of the purchase price to manage their mortgage payments. As Redfin agent Annie Foushee from Denver notes, traditional buyers are leveraging family support to place larger down payments, while investors focus on cash offers for homes needing renovation.

In June, the typical homebuyer’s down payment constituted 18.6% of the purchase price, the highest level in more than a decade, up from 15% a year earlier. Nearly 60% of buyers put down more than 10%, a rise from the previous year’s 56.6%.

Several factors contribute to this trend:

  1. Rising Home Prices: The median U.S. home price hit a record $442,525 in June. As home values climb, so do the associated down payments.
  2. Elevated Mortgage Rates: With average mortgage rates at 6.92% in June, one of the highest rates in 20 years, buyers are incentivized to pay more upfront to reduce their monthly payments.
  3. Increased Equity: Home sellers benefit from rising property values, allowing them to use profits from previous sales for larger down payments on new homes.

Additionally, all-cash purchases comprised 30.7% of home sales in June, a slight increase from 30.4% the previous year. Redfin Senior Economist Sheharyar Bokhari explains that the trend in all-cash sales often mirrors mortgage rate fluctuations. With rates now easing from recent highs, all-cash purchases might stabilize.

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FHA loans, which are popular among first-time buyers, fell to 13.7% of mortgaged sales—the lowest since August 2022—down from 14.9% a year prior. This decline is attributed to high home prices and elevated mortgage rates, which limit affordability. Meanwhile, VA loans accounted for 6.7% of sales, slightly down from 6.9% the previous year. Conventional loans remained dominant, representing 79.5% of all loans, up from 78.2% a year ago. Jumbo loans hovered at 6.6%, nearly unchanged from 6.5%.

Metro-level data reveal significant shifts: Newark, NJ, saw the largest increase in down payments, rising 51.5% to $125,000. Other notable increases occurred in Las Vegas, Washington, D.C., New Brunswick, NJ, and Nashville, TN. Conversely, down payments decreased in Jacksonville, FL, Oakland, CA, and Tampa, FL.

San Francisco led with the highest down payment percentage at 25.8%, followed closely by San Jose and Anaheim, CA, due to a concentration of affluent buyers. Virginia Beach, FL, reported the lowest percentage at 3%, reflecting a higher use of VA loans.

For all-cash purchases, West Palm Beach, FL, had the highest share at 50.4%, followed by Riverside, CA, and Detroit, indicating strong investor interest. Conversely, San Jose, Seattle, and Oakland had the lowest all-cash purchase rates, correlating with their high median home prices.

In summary, rising down payments, impacted by various economic factors, reflect broader trends in the U.S. housing market as buyers navigate high prices and mortgage rates.

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