Redfin Reports the Typical Buyer’s Down Payment is 16% of the Home’s Price

Rhea-AI Summary

The typical U.S. homebuyer's down payment reached 16.3% of purchase price in December, up from 15% a year earlier, according to a new Redfin report. In dollar terms, this amounts to $63,188, a 7.5% increase year-over-year—the largest growth in five months.

This rise is primarily attributed to increasing home prices, which climbed 6.3% annually to approximately $428,000. High mortgage rates (near 7%) are also influencing buyers to make larger down payments to reduce monthly interest costs.

Other key findings include:

• Cash purchases represented 30.6% of home sales, down from 33.8% a year ago
• FHA loans accounted for 15% of mortgaged sales, slightly below last year's 15.9%
• VA loans increased to 6.7% from 6.2% a year earlier
• Conventional loans remain dominant at 78.4% of mortgages

Regional variations show San Francisco leading with 26.4% average down payments, while Virginia Beach had the lowest at just 3%.

Positive

• Median U.S. home-sale price rose 6.3% year-over-year to $428,000
• Typical down payment increased 7.5% year-over-year to $63,188
• VA loans increased to 6.7% from 6.2% a year earlier
• Housing markets in much of the country are tilting in buyers' favor

Negative

• Mortgage rates remain elevated near 7%
• Cash purchases declined to 30.6% from 33.8% year-over-year
• Higher home prices making it harder for buyers to afford large down payments

Insights

Real Estate Market Analyst

Redfin's latest report on homebuyer down payment trends reveals significant market dynamics that could impact the company's operational landscape and financial performance. The typical U.S. homebuyer now contributes 16.3% of the purchase price as a down payment ($63,188), marking a 7.5% year-over-year increase – the largest in five months.

This shift primarily reflects the 6.3% rise in median home prices rather than changing buyer behavior. The stabilization of down payment percentages following pandemic-era volatility suggests a normalizing market, which could benefit Redfin's transaction predictability. However, the company's senior economist Sheharyar Bokhari's observation that markets are "tilting in buyers' favor" signals a potential strategic inflection point for Redfin's business model.

The decline in all-cash purchases from 33.8% to 30.6% year-over-year is particularly noteworthy for Redfin investors. This trend, coupled with reduced investor activity, could increase the pool of mortgage-dependent buyers who may utilize Redfin's integrated mortgage services, potentially boosting this higher-margin business segment. The company's technology platform is well-positioned to capitalize on the needs of these buyers who require more comprehensive services.

Regional variations in down payment behaviors create both opportunities and challenges for Redfin. In markets like San Francisco, where down payments average 26.4%, Redfin benefits from higher transaction values but faces greater competition from traditional high-end brokerages. Conversely, in markets like Virginia Beach (3% down payment average) and Detroit (6.5%), Redfin's technology-driven efficiency could provide competitive advantages in serving price-sensitive buyers.

The relatively stable FHA loan usage (15% of mortgaged sales) combined with increasing VA loan utilization (6.7%, up from 6.2%) suggests opportunities for Redfin to expand its mortgage services for first-time and military buyers. This could provide a growth vector as the company continues to diversify beyond its core brokerage business.

For Redfin investors, these trends indicate a market environment where the company's technology-first approach and integrated service model may become increasingly valuable as buyers navigate a more balanced market with persistently high mortgage rates. The company's ability to efficiently serve both cash-rich and financing-dependent buyers across diverse regional markets could be a key differentiator as housing market dynamics continue to evolve.

The typical U.S. homebuyer now puts down roughly $63,000, about $4,000 more than last year, because of a jump in home prices

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — The typical U.S. homebuyer’s down payment was equal to 16.3% of the purchase price in December, up from 15% a year earlier, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. In dollar terms, the typical homebuyer’s down payment was $63,188. That’s up 7.5% from a year earlier, the biggest increase in five months.

The data in Redfin’s report is from the company’s analysis of county records across 40 of the most populous U.S. metropolitan areas. December 2024 is the most recent month for which data is available.

The amount of money homebuyers are putting down is higher than a year ago mainly because home prices are up: A higher price means buyers typically make a bigger deposit. The median U.S. home-sale price rose 6.3% year over year in December, to roughly $428,000.

The percentage buyers are putting down is relatively high because mortgage rates are elevated near 7%, and some buyers are putting down more up front to bring down their monthly interest payments.

Down payments are no longer seeing the wild swings they were during the pandemic. The median U.S. down payment rose from the 10% range before the pandemic to the 15% range in 2021, which was the height of the pandemic homebuying frenzy. Mortgage rates also drove that increase, but the dynamics were very different then: Record-low rates of under 3% were fueling intense bidding wars among homebuyers, which motivated many to put more money down to make their offers stand out in a competitive environment.

“While a larger down payment can lower monthly mortgage payments and help strengthen an offer in a bidding war, bigger isn’t always better,” said Sheharyar Bokhari, a senior economist at Redfin. “Housing markets in much of the country have started tilting in buyers’ favor, allowing buyers to set the terms they want. That means house hunters don’t necessarily need to break the bank for a huge down payment if it makes more financial sense to save some money for things like future home renovations or other investments.”

31% of Homebuyers Pay in Cash, Down From 34% a Year Ago

Roughly three in 10 (30.6%) U.S. homes were bought with cash in December. That’s down from 33.8% a year earlier, but up from September’s three-year low of 28.6%.

The share of buyers paying with cash peaked in 2023 because that’s when mortgage rates peaked, hitting a two-decade high of nearly 8%. Buyers who can afford to pay with cash are more inclined to do so when rates are high because they’re avoiding high monthly interest payments, and saving money in the long run.

Mortgage rates have since come down slightly and evened out in the 6% to 7% range, bringing down the share of buyers who are paying in all cash. Additionally, investors–who make up a big share of all-cash buyers–are purchasing fewer homes.

On an annual basis, 32.6% of 2024’s home sales were made with cash, the lowest share in three years.

15% of Mortgaged Homebuyers Use FHA Loans, Little Changed From a Year Ago

Roughly one of every seven (15%) mortgaged home sales used an FHA loan in December, down slightly from 15.9% a year earlier but up from mid-2022’s decade-low of roughly 10% .

The share of mortgaged home sales using a VA loan rose to 6.7%, from 6.2% a year earlier.

More homebuyers are using FHA loans now than in late 2021 and early 2022, when the ultra-competitive environment favored buyers with higher down payments and more ability to prove their financial security. Now, buyers are more likely to get an offer using an FHA loan accepted. Additionally, higher home prices mean more buyers find it hard to afford large down payments, making FHA loans more popular.

Conventional loans are by far the most common type of mortgage. Nearly four in five (78.4%) borrowers used a conventional loan in December, little changed from 77.9% a year earlier.

Metro-Level Highlights

The data below is from December 2024, the most recent month for which data is available, and covers 40 of the most populous U.S. metros.

• Down payments
  • Down-payment percentages were highest in San Francisco, where the typical homebuyer put down 26.4% of the purchase price. It’s followed by two other California metros: Anaheim and San Jose, at 25% apiece.
  • They were lowest in Virginia Beach, VA (3%), Detroit (6.5%) and Baltimore (8.5%).
• FHA loans
  • FHA loans were most prevalent in Riverside, CA, where 25.4% of mortgaged home sales used one. Next come Providence, RI (25.1%) and Las Vegas (24.3%).
  • They were least prevalent in California: San Francisco (2.1%), San Jose (2.2%) and Anaheim (5%).
• VA loans
  • VA loans were most prevalent in Virginia Beach, VA (39%), Jacksonville (16.3%) and Washington, D.C. (14.3%). Those metros all have a large military presence.
  • They were least prevalent in the Bay Area: San Jose (less than 1%), San Francisco (1.5%) and Oakland (1.8%).
• All cash
  • All-cash home purchases were most prevalent in West Palm Beach, FL, where more than half (50.4%) of homes were bought in cash. Next came Cleveland (46%) and Jacksonville (39.3%).
  • They were least prevalent in Oakland (16.2%), San Jose (17.8%) and Seattle (18.8%).

To view the full report, including charts and additional metro-level data, please visit: https://www.redfin.com/news/down-payments-all-cash-december-2024

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, and title insurance services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve approximately 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250225641305/en/

Contact Redfin

Redfin Journalist Services:

Angela Cherry

press@redfin.com

Source: Redfin

FAQ

What percentage of purchase price are homebuyers putting down according to Redfin's latest report?

According to Redfin's December report, the typical U.S. homebuyer's down payment was 16.3% of the purchase price, up from 15% a year earlier.

How much is the average down payment for a home purchase in dollars (RDFN data)?

The typical homebuyer's down payment was $63,188 in December, representing a 7.5% increase from the previous year.

Why are RDFN homebuyers making larger down payments in December 2024?

Homebuyers are making larger down payments primarily because home prices increased 6.3% year-over-year, and some buyers are putting more money down upfront to reduce their monthly interest payments with mortgage rates near 7%.

What percentage of home purchases were all-cash transactions according to Redfin's December report?

According to Redfin, 30.6% of U.S. homes were bought with cash in December, down from 33.8% a year earlier.

Which U.S. metro area had the highest down payment percentage according to RDFN's December data?

San Francisco had the highest down payment percentage at 26.4%, followed by Anaheim and San Jose at 25% each.

How prevalent were FHA loans in Redfin's December housing market data?

FHA loans accounted for 15% of mortgaged home sales in December, slightly down from 15.9% a year earlier but up from mid-2022's decade-low of approximately 10%.