U.S. Homebuyers Putting More Down MABA MassachusettsRealEstate FirstTimeHomeBuyers MaBuyerAgent

 As inflation continues to impact the wallet of Americans, potential home buyers are being impacted as well. Whereas ten percent of the price of a home was the standard fare for down payments, a new report from Redfin has found that the typical U.S. homebuyer’s down payment was sixteen point three percent of the purchase price in December 2024, up from fifteen percent a year earlier. In dollar terms, the typical homebuyer’s down payment was $63,188 up seven point five percent from a year earlier, marking the biggest increase in five months.

 The amount of money homebuyers are putting down is higher than a year ago mainly because home prices are up: A higher price means buyers typically make a bigger deposit. The median U.S. home-sale price rose six point three percent year-over-year in December, to roughly $428,000. The percentage buyers are putting down is relatively high because mortgage rates are elevated near seven percen, and some buyers are putting down more up front to bring down their monthly interest payments.

 Down payments are no longer seeing the wild swings they were during the pandemic. The median U.S. down payment rose from the ten percent range before the pandemic to the fifteen percent range in 2021, which was the height of the pandemic homebuying frenzy. Mortgage rates also drove that increase, but the dynamics were very different then: Record-low rates under three percent 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,” said Sheharyar Bokhari, Senior Economist at Redfin. “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.”

All-Cash Down Payments Dwindle

 Roughly three in ten (thirty point six percent) U.S. homes were bought with cash in December. That’s down from thirty three point eight percent a year earlier, but up from September’s three year low of twenty eight point six percent.

 The share of buyers paying with cash peaked in 2023 because that’s when mortgage rates peaked, hitting a two-decade high of nearly eight percent. 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 overall.

 Mortgage rates have since come down slightly and evened out in the six to seven percent 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, thirty two point six percent of 2024’s home sales were made with cash, the lowest share in three years.

FHA vs. VA Loans?

 Roughly one of every seven (fifteen percent) mortgaged home sales used an FHA loan in December, down slightly from fifteen point nine percent a year earlier but up from mid-2022’s decade-low of roughly ten percent. The share of mortgaged home sales using a VA loan rose to six point seven percent, from six point two percent a year earlier.

 More home buyers are reportedly using FHA loans now than in late 2021 and early 2022, when the ultra-competitive environment favored buyers with higher down payments and more ability to prove their financial security. Now, buyers are more likely to get an offer using an FHA loan accepted. Additionally, higher home prices mean more buyers find it hard to afford large down payments, making FHA loans more popular.

 Conventional loans are by far the most common type of mortgage, with nearly four in five (seventy eight point four percent) borrowers having used a conventional loan in December, little changed from seventy seven point nine percent a year earlier.

Metro-Level Highlights

 The data below is from December 2024, the most recent month for which data is available, and covers forty of the most populous U.S. metros:

• Down payments: Down payment percentages were highest in San Francisco, where the typical homebuyer put down twenty six point four percent of the purchase price. It’s followed by two other California metros: Anaheim and San Jose, at twenty five percent apiece. They were lowest in Virginia Beach, Virginia (three percent); Detroit, Michigan (six point five percent); and Baltimore, Maryland (eight point five percent).
• FHA loans: FHA loans were most prevalent in Riverside, California, where twenty five point four percent of mortgaged home sales used one. Next came Providence, Rhode Island (twenty five point one percent) and Las Vegas, Nevada (twenty four point three percent). FHA loans were least prevalent in California: San Francisco (two point one percent), San Jose (two point two percent), and Anaheim (five percent).
• VA loans: VA loans were most prevalent in Virginia Beach, Virginia (thirty nine percent); Jacksonville, Florida (sixteen point three percent); and Washington, D.C. (fourteen point three percent) all three of those metros having a large military presence. VA loans were least prevalent in the Bay Area: San Jose (less than one percent), San Francisco (one point five percent), and Oakland (one point eight percent).
• All-cash sales: All-cash home purchases were most prevalent in West Palm Beach, Florida, where more than half (fiftypoint four percent) of homes were bought in cash. Next came Cleveland (forty six percent) and Jacksonville (thirty nine point three percent). All-cash sales were least prevalent in Oakland (sixteen point two percent), San Jose (seventeen point eight percent), and Seattle (eighteen point eight percent).

Click here for more on Redfin’s examination of down payment trends.

The post U.S. Homebuyers Putting More Down  first appeared on The MortgagePoint.

FIRST TIME HOMEBUYERS

Selecting the Right Homebuyer's agent

Unlike most other real estate agents, a MABA home buyer's broker never represents both a buyer and seller in the same transaction so you never have to worry whether a MABA agent is really looking out for your best financial interests. A MABA buyer's agent acts as your advocate, real estate educator, advisor and negotiator, always loyal to you and dedicated to helping you find and buy the best home with the best terms at the price and showing you which homes to avoid along the way.

Fewer than one percent of the agents and brokers in Massachusetts meet our high standards. 

Whether you are ready to buy now or just beginning your home buying journey, click here to choose a Great Buyer's Agent to answer all of your home buying questions!