The typical U.S. homebuyer’s down payment was equal to 16.3% of the purchase price in December, up from 15% a year earlier, according to a report from Redfin.
The increase in the average down payment is due mainly to the increase in home prices. The typical U.S. homebuyer now puts down roughly $63,000, which is 7.5% – or about $4,000 – more than December 2022.
That’s the biggest annual increase in the previous five months.
The data in Redfin’s report is from the company’s analysis of county records across 40 of the most populous U.S. metropolitan areas. December 2024 is the most recent month for which data is available.
The median U.S. home-sale price increased 6.3% year over year in December, to roughly $428,000.
Some buyers are putting down more up front to bring down their monthly interest payments – but down payments are no longer seeing the wild swings they were during the pandemic.
The median U.S. down payment increased from the 10% range before the pandemic to the 15% range in 2021, which was the height of the pandemic home buying frenzy.
Mortgage rates also drove that increase, but the dynamics were very different then: Record-low rates of under 3% were fueling intense bidding wars among homebuyers, which motivated many to put more money down to make their offers stand out in a competitive environment.
“While a larger down payment can lower monthly mortgage payments and help strengthen an offer in a bidding war, bigger isn’t always better,” says Sheharyar Bokhari, a senior economist at Redfin, in the report. “Housing markets in much of the country have started tilting in buyers’ favor, allowing buyers to set the terms they want. That means house hunters don’t necessarily need to break the bank for a huge down payment if it makes more financial sense to save some money for things like future home renovations or other investments.”
Roughly three in 10 (30.6%) U.S. homes were bought with cash in December. That’s down from 33.8% a year earlier, but up from September’s three-year low of 28.6%.
The share of buyers paying with cash peaked in 2023 because that’s when mortgage rates peaked, hitting a two-decade high of nearly 8%. Buyers who can afford to pay with cash are more inclined to do so when rates are high because they’re avoiding high monthly interest payments, and saving money in the long run.
Mortgage rates have since come down slightly and evened out in the 6% to 7% range, bringing down the share of buyers who are paying in all cash. Additionally, investors–who make up a big share of all-cash buyers–are purchasing fewer homes.
On an annual basis, 32.6% of 2024’s home sales were made with cash, the lowest share in three years.
Photo: Pepi Stojanovski