A new report from Redfin says the typical down payment for U.S. homebuyers hit a record high of $67,500 in June, up 14.8% from $58,788 a year earlier.
This was the 12th consecutive month the median down payment rose year over year.
The huge jump in the median down payment significantly outpaced the increase in home prices, which were up 4% in June year over year. The increase is being influenced by the current market, where higher-priced, turnkey homes in desirable neighborhoods are more likely to sell. It’s also partly due to buyers putting down a higher percentage of the purchase price as a down payment.
“Investors are still coming in with all-cash offers on homes that need to be renovated. Traditional buyers are putting down large down payments to try and lower their mortgage payment,” says Annie Foushee, a Redfin agent in Denver. “These buyers will often utilize the help of family members to put down more than they could on their own.”
The typical homebuyer’s down payment was 18.6% of the purchase price in June, the highest level in over a decade and up from 15% a year earlier.
Nearly three in five (59.4%) homebuyers put down more than 10% of the purchase price in June, up from 56.6% a year earlier.
Redfin says down payments are increasing for a number of reasons:
Rising home prices: The median-priced U.S. home was a record $442,525 in June, up 4% year over year. Higher home prices naturally lead to a higher down payment, which is a percentage of the home price.
Elevated mortgage rates: Homebuyers are incentivized to put down more money upfront, and borrow less, when mortgage rates are higher. The 6.92% average mortgage rate in June was among the highest in the past 20 years, pushing buyers to increase their down payment to minimize monthly payments.
Buyers have more equity: With home prices up, people who sell their previous property for more than they purchased it can use the extra equity for a larger down payment on their new home.
To access the full report, click here.