H
omebuyers' Down Payments Surge 14.8% Annually in June

    According to a recent report by Redfin, the median down payment for U.S. homebuyers hit a record high of $67,500 in June 2024, up 14.8% from $58,788 a year earlier. This marks the 12th consecutive month where the median down payment has risen year over year.

    The increase in median down payment is significantly higher than the rise in home prices, which were up 4% in June year over year. This trend is largely influenced by the current market, where higher-priced, turnkey homes in desirable neighborhoods are more likely to sell. Additionally, buyers are 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,\" said 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.

    Almost three in five (59.4%) homebuyers put down more than 10% of the purchase price in June, up from 56.6% a year earlier.

    Down payments are increasing for several 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.

    All-cash purchases make up nearly a third of home sales

    The percentage of U.S. home purchases made with all cash rose to 30.7% in June, up slightly from 30.4% a year ago.

    \"The percentage of all-cash sales generally follows the same trend as the rise and fall of mortgage rates. When rates are down, the percentage of all-cash sales is down too, and the opposite is true when rates go up,\" said Redfin Senior Economist Sheharyar Bokhari. \"That means we may start to see all-cash purchases level off a little now that mortgage rates have started to come down from recent highs.\"

    FHA loans fall to lowest level in nearly two years

    FHA loans made up 13.7% of mortgaged U.S. home sales in June, the smallest share since August 2022 and down from 14.9% a year earlier. FHA loans have declined because home prices are at near-record highs and mortgage rates are still elevated, meaning fewer relevant buyers are able to afford a home.

    VA loans made up 6.7% of all mortgaged home sales, down slightly from 6.9% a year earlier.

    Conventional loans--the most common type--represented nearly four out of every five loans (79.5%) in June, up slightly from 78.2% a year ago. Jumbo loans--used for higher loan amounts and popular among luxury buyers--represented 6.6% of mortgaged sales, essentially unchanged from 6.5% a year earlier.

    Metro-Level Highlights: June 2024

    Metros with biggest increases/decreases in down payments, in dollars

    In Newark, NJ, the median down payment jumped 51.5% to $125,000 from $82,500 a year ago--the largest percentage increase among the metros Redfin analyzed. Next came Las Vegas (up 40.7% from $32,328 to $45,500), Washington, D.C. (up 38.7% from $54,800 to $76,000), New Brunswick, NJ (up 32.7% from $93,625 to $124,213) and Nashville, TN (up 32% from $46,500 to $61,395).

    Down payments only fell in three metros: Jacksonville, FL (down 28.4% from $39,950 to $28,338), Oakland, CA (down 11% from $219,000 to $195,000) and Tampa, FL (down 6.4% from $42,500 to $39,773).

    Metros with highest/lowest down payments, in percentages

    In San Francisco, the median down payment was equal to 25.8% of the purchase price--the highest among the metros Redfin analyzed. It was followed by San Jose, CA (25.7%) and Anaheim, CA (25%). Down payment percentages are typically higher in San Francisco's Bay Area due to a higher-concentration of wealthy residents who can afford to put a higher percentage of the purchase price down.

    Down payment percentages were lowest in Virginia Beach, FL (3%)--an area with a higher concentration of veterans using VA loans with little to no down payment--followed by Detroit (6.8%) and Jacksonville, FL (8.6%).

    Metros where all-cash purchases are most/least common

    In West Palm Beach, FL, 50.4% of home purchases were made in cash--the highest share among the metros Redfin analyzed--followed by Riverside, CA (39.9%) and Detroit (38.9%). All three metros see strong investor activity.

    All-cash purchases were least common in San Jose, CA (18.3%), Seattle (21%) and Oakland (21.2%)--three more expensive metros where the median-priced home tops $850,000.

    Metros with biggest increases/decreases in share of all-cash purchases

    In Pittsburgh, PA, 28.6% of home purchases were made in cash, up from 19.2% a year earlier--the largest increase among the metros Redfin analyzed. Next came New Brunswick, NJ (up from 31.1% to 36.8%) and Newark, NJ (up from 25.9% to 31.6%).

    In Providence, RI, 23.1% of home purchases were made in cash, down from 33.5% a year earlier--the lowest increase among the metros Redfin analyzed. Next came Baltimore (down from 36.1% to 26.8%) and Jacksonville, FL (down from 44.2% to 38.1%).