Down payments have doubled in the past 4 years
The latest data points to some easing, but payments could hit a new peak later in the year. Regionally, payments are down in areas with rising inventory.
Key points:
- Realtor.com data showed that the median down payment in the first quarter was $26,000, or 13.6% of the purchase price.
- While down from their peak of more than $30,000 last year, down payments have soared since early 2020 when the median payment was just $14,000.
- Higher down payments are a result of continued competition, high savings rates and elevated mortgage rates.
Consumers who purchased a home earlier this year didn't have to shell out quite as much for a down payment, but affordability is still an issue for most would-be buyers.
A new study from Realtor.com found the median down payment was $26,000 during the first quarter of the year, equating to 13.6%. That's down from the peak of $30,400 (14.7%) in the third quarter of 2023 — but the report noted the decline was due in part to seasonality, and a new peak could arrive later this year.
Buyers paying twice what they were in 2020
Down payments have gone up compared to a year ago, when the median was $23,700 — but the numbers are more startling when looking back a few years. According to the latest data, down payments have nearly doubled since the onset of the pandemic: In the first quarter of 2020, the median down payment was $14,000.
"This trend may stem from intense local competition from a lack of homes for sale, compelling some to increase down payments to win the home, while others aim to lower their monthly payments by putting more down and taking out a smaller loan," said Hanna Jones, economic research analyst at Realtor.com.
The upward trajectory also continues to signal that more buyers are either high earners or repeat buyers leveraging existing home equity, said Danielle Hale, chief economist at Realtor.com.
"The current housing market's overall unaffordability has an impact on who is buying homes right now," Hale said.
Down payments aren't expected to trend back down in the short term, given the combination of a low-inventory environment, which is pushing prices up, and high mortgage rates. Even though listings are on the rise, supply remains well below pre-pandemic levels.
"Shoppers looking to navigate these trends may find that relatively affordable markets offer the opportunity to achieve homeownership and limit interest payments by using their existing savings to put a larger amount down as a down payment on a home," Jones said.
Why have down payments stayed high?
Americans are still holding on to some of the savings they built up during the pandemic, according to the report. The personal savings rate spiked early in the pandemic, but dipped in late 2021 and early 2022 as inflation took hold.
The savings rate began climbing again in 2023, but is down so far this year, hitting 3.2% in March — well below the pre-pandemic norm of 6.5%.
"Still-large accumulations of pandemic savings likely help some homebuyers, especially buyers who also have the benefit of existing home equity that can boost a down payment, as well," Jones said.
Where inventory is rising, down payments are falling
Buyers in Texas and Florida, two states where inventory is climbing faster than much of the country, are making smaller down payments.
Jones said the softening of those markets has led to less competition and more options. Texas metros like Corpus Christie, Beaumont and San Antonio saw down payments in the 6-7% range, while the dollar amount in some Florida metro areas dropped 40-50%.
On the other hand, in California — where inventory remains low — down payment percentages are among the highest. In the Bay Area and Southern California, average down payments are in the 20-24% range, with buyers shelling out more than $200,000 for down payments in San Jose, Santa Barbara and San Francisco.