Record-High Down Payments See Moderation

Buyers are paying record-high down payments thanks to the combination of soaring prices and high competition, but they may see a reprieve soon, according to new data from Redfin.

The typical U.S. mortgage borrower in July put down $62,500, up 13.6% YOY and nearly twice the growth in home sales prices.

It’s also nearly double the median $32,917 down payment from July 2019, before the pandemic.

Down payments have fallen slightly since peaking at $66,000 in May and June, due in part to the cooling market.

Just under 59% of buyers who used a mortgage had a 10%-plus down payment, up from 57.5% a year ago but down from a peak of 60.5% in May.

“Homebuyers don’t need to make enormous down payments anymore because they’re much less likely to encounter bidding wars now that so many Americans have bowed out of the market,” said Redfin Senior Economist Sheharyar Bokhari. 

“Between higher mortgage rates creating higher monthly housing payments and inflation pushing up the prices of everything from food to fuel, buyers need to set aside more money for everyday expenses. That, along with the slumping stock market, is cutting into down-payment budgets.”

Homebuyers just can’t produce that much money upfront anymore thanks in part to inflation, which has risen to record highs while home prices have only slightly moderated.

Nearly 40% of consumers cannot put any money at all into savings. Just under half expect to add to their personal debt by year-end in order to make ends meet, according to an article by Jessica Dickler at CNBC.

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Are you offering unique options for buyers as the market normalizes? If so, let us know. Email Editor Kimberley Haas at [email protected].