Down Payments Are Going Up

Of all the expenses involved in owning a home, perhaps the most challenging one comes right at the beginning — amassing the down payment. And it’s only getting harder. According to a new report from Realtor.com, the national median down payment rose to nearly 15 percent of purchase price, or $30,400, during the third quarter of 2023, up from about 12.5 percent, or $23,300, during the third quarter of 2021.

Higher home prices inflate down payments, but there are other explanations. One is a competitive market in which buyers have bulked up their down payments to gain an edge in bidding wars. Rising mortgage rates have also prompted buyers to offer more cash up front and borrow less, thus saving on mortgage payments. Finally, increased personal savings during the pandemic years have left buyers with more cash on hand.

The rates at which down payments have changed vary by region, according to the report. From Q3 2022 to Q3 2023, they rose most in expensive Northeast metros, especially those with more international buyers (who tend to come with more cash). Down payments declined in the South and in western Sunbelt metros during the same period. Many of these areas experienced a pandemic real estate boom that has subsequently waned. And some have military bases, meaning more V.A. loans to help offset down payments. In El Paso, the median down payment fell the most over the past year, by about 1.8 percent, to 5.6 percent of purchase price.

This week’s chart shows the five U.S. metros with the highest median down payments when measured as percentage of purchase price. San Jose, Calif., — one of the most expensive areas in the country — saw the highest metro-area median down payments, reaching nearly 25 percent of purchase price, or $235,183. Three other pricey California metros landed among the top five, as did the more modestly priced Northport, Fla., with a median down payment of 22.9 percent of purchase price, or about $81,853.

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