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The typical down payment on a home in the United States fell to its lowest level in nearly two years in January as many buyers remained locked out of homeownership.
A typical down payment for a homebuyer in the U.S. fell 10 percent between January 2022 and 2023, to $42,375, according to a report released Wednesday by Redfin. The median down payment was down 35 percent from its peak in June 2022 but still up more than 30 percent from pre-pandemic numbers.
The median down payment in January was equivalent to 10 percent of the home purchase price, down from 13.6 percent a year earlier and the pandemic peak of 17.5 percent in May 2022, according to Redfin.
Down payments have fallen due in part to mortgage rates higher than 6 percent and low housing inventory driving up costs, stretching the limits of what buyers can afford and forcing sellers to make concessions, the Redfin report argues.
Additionally, high prices are keeping completion low, with most offers written by Redfin agents not facing other bids, according to the report — a stark contrast to the hyper-competitive market of 2021.
Home prices remain abnormally high but they have fallen about 10 percent from their May 2022 peak and are approximately 1.5 percent lower than they were a year ago, according to the report, meaning a 10 percent down payment would be 1.5 percent cheaper than it was a year ago.
“One silver lining of high mortgage rates and economic turmoil is that they’ve slowed competition,” said Redfin Senior Economist Sheharyar Bokhari. “That means buyers are often able to purchase a home without facing a bidding war and don’t need to fork over a huge portion of their savings for a down payment to grab sellers’ attention. Today’s buyers are also able to save money in other ways: Nearly half of sellers are offering concessions, like helping pay for a mortgage-rate buydown or covering closing costs, to attract buyers.”
