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The average down payment for U.S. homebuyers has reached unprecedented levels, outpacing elevated home prices driven by the current market conditions, according to a Redfin analysis released on Wednesday.
In June, the median down payment soared to a record $67,500, a 14.8 percent increase from $58,788 the previous year. This marks the 12th consecutive month of year-over-year growth in median down payments.
Down payments have grown faster than home prices, which were up 4 percent year over year in June. This trend is likely due to current market conditions, including the likelihood of higher-priced, move-in-ready homes in desirable neighborhoods to sell more often as well as the increased frequency of buyers putting down a larger percentage of the purchase price upfront.
“Investors continue to make all-cash offers on homes needing renovation, while traditional buyers are increasing their down payments to reduce mortgage costs,” Annie Foushee, a Redfin agent in Denver, said. “Many of these buyers are also getting financial support from family to afford larger down payments.”
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According to Redfin, the typical U.S. homebuyer’s down payment hit the highest level in over a decade in June, at 18.6 percent of the purchase price, up from 15 percent the previous year. Nearly 60 percent of homebuyers were putting down 10 percent of the purchase price upfront, an increase from 56.6 percent the previous year.
Among the 40 largest U.S. metros, San Francisco had the highest median down payment, equating to 25.8 percent of the purchase price, according to Redfin data. Conversely, down payment percentages were lowest in Virginia Beach, Florida, at just 3 percent of the purchase price.
Redfin attributes the rise in down payments to increasing home prices, elevated mortgage rates and increases in home equity.
Home prices
The median-priced U.S. home climbed to $442,525 in June, up 4 percent year over year.
Elevated mortgage rates
Higher mortgage rates have incentivized buyers to make larger down payments to reduce the amount borrowed. The average mortgage rate of 6.92 percent in June pushed buyers to increase their down payments in order to lower their monthly payments.
Increased home equity
Homeowners who sold their previous property for more than they paid were able to use the extra equity for larger down payments on new homes. All-cash home purchases have also seen a slight increase, while FHA loans have dropped to their lowest level in nearly two years.
In June, the share of cash purchases rose to 30.7 percent, up from 30.4 percent the previous year.
“The percentage of all-cash sales typically mirrors the fluctuations in mortgage rates. When rates are low, all-cash sales decline, and they rise when rates go up,” Redfin Senior Economist Sheharyar Bokhari said. “We might see all-cash purchases stabilize now that mortgage rates have started to decrease from recent highs.”
Pittsburgh, Pennsylvania, saw the largest increase in all-cash home purchases, with 28.6 percent of homes bought with cash, up from 19.2 percent in 2023. New Brunswick, New Jersey, followed with 36.8 percent of cash purchases, up from 31.1 percent the previous year.
FHA loans made up 13.7 percent of mortgaged U.S. home sales in June, the smallest share since August 2022, and down from 14.9 percent a year earlier. Redfin attributes this decline to near-record-high home prices and rising mortgage rates, which have made affordability more challenging for buyers who typically take advantage of FHA loans’ more favorable and affordable terms.
