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Key Takeaways
- According to Realtor.com’s data, the median downpayment reached a new record of $29900 last year.
- Down payments are 33% higher than
- While the median down payment has naturally increased due to rising prices, buyers are also putting more money down upfront in order to avoid some of those borrowing costs.
Not only are house prices at exorbitant heights. Down payments for homebuyers have also increased.
Homebuyers put down a record amount of money when buying a house in 2024. Higher mortgage rates encouraged many buyers to pay more upfront to avoid borrowing costs. A Realtor.com report shows that down payments in 2024 increased by $2,000 to reach a median amount of $29900. This is in line with the trend of rising down payments since the pandemic.
"Today's home sales are skewed toward higher-end homes, and this means larger down payments from more financially prepared, high-earning buyers as entry-level and lower-earning buyers sit out,” said Realtor.com Chief Economist Danielle Hale.
The median down payment for the second quarter was the highest ever.
The amount of money that homebuyers deposit to start a home purchase is increasing as prices continue to rise.
The initial payment share also increased. According to the report, buyers contributed 14.4% of their home’s price last year. This is the highest amount in more than 10 years of data. Before the COVID-19 pandemic, the typical downpayment was a far lower portion of the home's price.
Homebuyers are paying a greater share of the price of a home when they make a purchase.
Mortgage rates will not fall until the down payment is lower
With prices hitting record levels and mortgage interest rates remaining elevated, home buyers are looking to cut costs wherever possible.
Some of the increase in down payments can be attributed to those who have the money to pay more upfront to avoid the high borrowing costs.
Hale says that it is unlikely that down payment amounts will drop significantly as long as borrowing prices remain near their recent peaks. According to Freddie Mac the average fixed rate mortgage for a 30-year term was 6.6%. This level has remained near this level since early March.
"As mortgage rates ease, a more diverse set of buyers, in terms of budgets, will likely enter the market, and the incentive to minimize their home loan will soften," Hale said. "However, if for-sale inventory fails to keep up with increased buyer demand, down payments could climb once again as the result of increased competition."
