Redfin Reports The Typical Homebuyer’s Down Payment is a Record $67,500, Up 15% From a Year Ago

Rhea-AI Summary

Redfin reports that the typical down payment for U.S. homebuyers reached a record high of $67,500 in June, up 14.8% from a year earlier. This marks the 12th consecutive month of year-over-year increases in median down payments. The typical down payment was 18.6% of the purchase price, the highest level in over a decade.

Nearly three in five (59.4%) homebuyers put down more than 10% of the purchase price. Factors contributing to this trend include rising home prices, elevated mortgage rates, and increased equity from previous home sales. All-cash purchases made up 30.7% of home sales, slightly up from last year. FHA loans fell to their lowest level in nearly two years, representing 13.7% of mortgaged sales.

Positive

• Record high median down payment of $67,500, up 14.8% year-over-year
• Typical down payment increased to 18.6% of purchase price, highest in over a decade
• 59.4% of homebuyers put down more than 10% of purchase price
• All-cash purchases rose to 30.7% of home sales
• Conventional loans represented 79.5% of mortgaged sales, up from 78.2% a year ago

Negative

• FHA loans declined to 13.7% of mortgaged sales, lowest since August 2022
• VA loans slightly decreased to 6.7% of mortgaged sales from 6.9% a year earlier
• Higher down payments may indicate affordability challenges for some buyers

Insights

Financial Analyst

The record-high $67,500 median down payment, up 14.8% year-over-year, significantly outpaces the 4% increase in home prices. This trend reflects a shifting market dynamic where buyers are putting down larger percentages to offset high mortgage rates, currently at 6.92%. The rise in all-cash purchases to 30.7% further indicates a market favoring well-capitalized buyers. FHA loans declining to 13.7% suggests reduced accessibility for first-time and lower-income buyers. These shifts could lead to a more polarized housing market, potentially impacting companies like Redfin by altering transaction volumes and commission structures.

Real Estate Market Analyst

The surge in down payments, especially in markets like Newark (51.5% increase) and Las Vegas (40.7% increase), indicates a growing divide in homebuyer capabilities. This trend, coupled with the 18.6% average down payment—the highest in a decade—suggests a market increasingly favoring affluent buyers and investors. The regional variations, such as San Francisco's 25.8% down payment percentage versus Virginia Beach's 3%, highlight the importance of local market dynamics. For Redfin and similar platforms, this could mean a shift in target demographics and marketing strategies, potentially focusing more on high-value transactions and cash buyers.

Economic Analyst

The increasing down payments and cash purchases reflect broader economic trends, including wealth concentration and the impact of prolonged low interest rates on asset values. The 30.7% all-cash purchase rate, up from 30.4% last year, suggests continued investor interest despite high prices. However, the decline in FHA and VA loans indicates potential challenges for middle-income buyers. This could lead to a 'barbell' effect in the housing market, with growth at the high and low ends but pressure on the middle. For Redfin, this might necessitate a strategic pivot to cater to a changing client base, potentially affecting their business model and revenue streams.

Nearly 3 in 5 homebuyers put down more than 10% of the purchase price, one of the highest shares on record

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — The typical down payment for U.S. homebuyers hit a record high of $67,500 in June, up 14.8% from $58,788 a year earlier, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. This was the 12th consecutive month the median down payment rose year over year.

The nearly-15% jump in the median down payment significantly outpaced the increase in home prices, which were up 4% in June year over year. The increase is 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.

“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,” said Annie Foushee, a Redfin agent in Denver. “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% of the purchase price in June, the highest level in over a decade and up from 15% a year earlier.

Nearly three in five (59.4%) homebuyers put down more than 10% of the purchase price in June, up from 56.6% a year earlier.

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% 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% 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.

All-cash purchases make up nearly a third of home sales

The percentage of U.S. home purchases made with all cash rose to 30.7% in June, up slightly from 30.4% 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,” said Redfin Senior Economist Sheharyar Bokhari. “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.”

FHA loans fall to lowest level in nearly two years

FHA loans made up 13.7% of mortgaged U.S. home sales in June, the smallest share since August 2022 and down from 14.9% 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.

VA loans made up 6.7% of all mortgaged home sales, down slightly from 6.9% a year earlier.

Conventional loans—the most common type—represented nearly four out of every five loans (79.5%) in June, up slightly from 78.2% a year ago. Jumbo loans—used for higher loan amounts and popular among luxury buyers—represented 6.6% of mortgaged sales, essentially unchanged from 6.5% a year earlier.

Metro-Level Highlights: June 2024

Metros with biggest increases/decreases in down payments, in dollars

In Newark, NJ, the median down payment jumped 51.5% to $125,000 from $82,500 a year ago 51.5%—the largest percentage increase among the metros Redfin analyzed. Next came Las Vegas (up 40.7% from $32,328 to $45,500), Washington, D.C. (up 38.7% from $54,800 to $76,000), New Brunswick, NJ (up 32.7% from $93,625 to $124,213) and Nashville, TN (up 32% from $46,500 to $61,395).

Down payments only fell in three metros: Jacksonville, FL (down 28.4% from $39,950 to $28,338), Oakland, CA ( down 11% from $219,000 to $195,000) and Tampa, FL (down 6.4% from $42,500 to $39,773).

Metros with highest/lowest down payments, in percentages

In San Francisco, the median down payment was equal to 25.8% of the purchase price—the highest among the metros Redfin analyzed. It was followed by San Jose, CA (25.7%) and Anaheim, CA (25%). Down payment percentages are typically higher in San Francisco’s Bay Area due to a higher-concentration of wealthy residents who can afford to put a higher percentage of the purchase price down.

Down payment percentages were lowest in Virginia Beach, FL (3%)—an area with a higher concentration of veterans using VA loans with little to no down payment—followed by Detroit (6.8%), and Jacksonville, FL (8.6%).

Metros where all-cash purchases are most/least common

In West Palm Beach, FL, 50.4% of home purchases were made in cash—the highest share among the metros Redfin analyzed—followed by Riverside, CA (39.9%) and Detroit (38.9%). All three metros see strong investor activity.

All-cash purchases were least common in San Jose, CA (18.3%), Seattle (21%) and Oakland (21.2%)—three more expensive metros where the median-priced home tops $850,000.

Metros with biggest increases/decreases in share of all-cash purchases

In Pittsburgh, PA, 28.6% of home purchases were made in cash, up from 19.2% a year earlier—the largest increase among the metros Redfin analyzed. Next came New Brunswick, NJ (up from 31.1% to 36.8%) and Newark, NJ (up from 25.9% to 31.6%).

In Providence, RI, 23.1% of home purchases were made in cash, down from 33.5% a year earlier—the lowest increase among the metros Redfin analyzed. Next came Baltimore (down from 36.1% to 26.8%) and Jacksonville, FL (down from 44.2% to 38.1%).

To view the full report, including charts, methodology and additional metro-level data please visit: https://www.redfin.com/news/all-cash-homebuyers-june-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, title insurance, and renovations 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. Customers selling a home can have our renovations crew fix it up to sell for top dollar. 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 more than 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/20240828874430/en/

Redfin Journalist Services:

Kenneth Applewhaite

press@redfin.com

Source: Redfin

FAQ

What was the typical down payment for U.S. homebuyers in June 2024 according to Redfin (RDFN)?

According to Redfin (RDFN), the typical down payment for U.S. homebuyers reached a record high of $67,500 in June 2024, up 14.8% from $58,788 a year earlier.

What percentage of the purchase price did the typical down payment represent in June 2024?

The typical down payment was 18.6% of the purchase price in June 2024, the highest level in over a decade and up from 15% a year earlier.

How many homebuyers put down more than 10% of the purchase price in June 2024?

Nearly three in five (59.4%) homebuyers put down more than 10% of the purchase price in June 2024, up from 56.6% a year earlier.

What percentage of home purchases were made with all cash in June 2024, according to Redfin (RDFN)?

According to Redfin (RDFN), 30.7% of U.S. home purchases were made with all cash in June 2024, up slightly from 30.4% a year ago.

What was the share of FHA loans in mortgaged U.S. home sales in June 2024?

FHA loans made up 13.7% of mortgaged U.S. home sales in June 2024, the smallest share since August 2022 and down from 14.9% a year earlier.