The Typical Down Payment Has Fallen 10% From a Year Ago As Housing Market Cools
The typical
The median down payment in January was equal to
Down payments are falling for several reasons:
-
The housing market is slow and there’s not much competition. Most offers for homes written by Redfin agents don’t face bidding wars. That’s a stark difference from the hyper-competitive housing market of 2021 and early 2022. Buyers no longer need to offer a big down payment to prove their financial stability and stand out from the crowd. Now that buyers often have the upper hand, they can offer an amount that works best for their individual circumstances. Diminished competition is also allowing more buyers to use FHA and
VA loans, which typically allow for much smaller down payments. -
High housing costs and inflation.
6% -plus mortgage rates, still-high home prices and inflation are hitting homebuyers’ pocketbooks hard. Buyers don’t have as much money to allocate to a down payment because monthly housing payments are higher than before; they may also be putting more cash toward a mortgage-rate buydown instead of their down payment. Additionally, buyers may be inclined to hold onto as much cash as possible in these uncertain economic times. -
Lower home prices = lower dollar down payments. Home prices remain stubbornly high, but they have fallen more than
10% from theirMay 2022 peak and1.5% from a year ago. A10% down payment on a home equals$400,000 ; if that same home was worth$40,000 in May, the buyer would have needed$450,000 for a$45,000 10% down payment.
“One silver lining of high mortgage rates and economic turmoil is that they’ve slowed competition,” said Redfin Senior Economist
Share of homes bought in cash hits nine-year high
Nearly one-third (
FHA,
Sixteen percent of mortgaged home sales used an FHA loan in January, up from
FHA and
Conventional loans are still by far the most common type. More than three-quarters (
To read the full report, including charts, methodology and metro-level data, visit: https://www.redfin.com/news/down-payments-decline-all-cash-january-2023/
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Source: Redfin