The typical down payment for homebuyers hit a record high of $67,500 in June, up 14.8 percent from $58,788 a year earlier, according to a new report from Redfin.
This was the 12th consecutive month the median down payment rose year-over-year.
The nearly 15 percent jump in the median down payment significantly outpaced the increase in home prices, which were up 4 percent in June year-over-year.
Increases are being influenced by the current market, where higher-priced, turnkey homes in desirable neighborhoods are more likely to sell. It’s also partly due to buyers putting down a higher percentage of the purchase price as a down payment, Redfin added.
“Investors are still coming in with all-cash offers on homes that need to be renovated. Traditional buyers are putting down large down payments to try and lower their mortgage payment,” Annie Foushee, a Redfin agent in Denver, said in a release. “These buyers will often utilize the help of family members to put down more than they could on their own.”
The typical homebuyer’s down payment was 18.6 percent of the purchase price in June, the highest level in over a decade and up from 15 percent a year earlier.
Nearly three in five (59.4 percent) homebuyers put down more than 10 percent of the purchase price in June, up from 56.6 percent a year earlier.
Redfin said down payments are increasing for a number of reasons:
- Rising home prices: The median-priced U.S. home was a record $442,525 in June, up 4 percent year-over -year. Higher home prices naturally lead to a higher down payment, which is a percentage of the home price.
- Elevated mortgage rates: Homebuyers are incentivized to put down more money upfront, and borrow less, when mortgage rates are higher. The 6.92 percent average mortgage rate in June was among the highest in the past 20 years, pushing buyers to increase their down payment to minimize monthly payments.
- Buyers have more equity: With home prices up, people who sell their previous property for more than they purchased it can use the extra equity for a larger down payment on their new home.
The percentage of home purchases made with all cash rose to 30.7 percent in June, up slightly from 30.4 percent a year ago.
“The percentage of all-cash sales generally follows the same trend as the rise and fall of mortgage rates. When rates are down, the percentage of all-cash sales is down too, and the opposite is true when rates go up,” Redfin Senior Economist Sheharyar Bokhari said. “That means we may start to see all-cash purchases level off a little now that mortgage rates have started to come down from recent highs.”
Federal Housing Administration (FHA) loans made up 13.7 percent of mortgaged home sales in June, the smallest share since August 2022 and down from 14.9 percent a year earlier. FHA loans have declined because home prices are at near-record highs and mortgage rates are still elevated, meaning fewer relevant buyers are able to afford a home.
Department of Veterans Affairs (VA) loans made up 6.7 percent of all mortgaged home sales, down slightly from 6.9 percent a year earlier.
Conventional loans — the most common type — represented nearly four out of every five loans (79.5 percent) in June, up slightly from 78.2 percent a year ago. Jumbo loans — used for higher loan amounts and popular among luxury buyers — represented 6.6 percent of mortgaged sales, essentially unchanged from 6.5 percent a year earlier.