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Published: Oct 06, 2022 5 min read
Photo collage illustration of a person on top of a stack of dollars trying to reach a house that is too high above their reach.
Money; Getty Images

The median down payment on homes in major U.S. markets doubled in the last three years — far outpacing the rise of house prices themselves.

In May and June 2022, the median down payment for home purchases by buyers with mortgages hit a peak of around $66,000, according to a new analysis of 40 metro areas from real estate brokerage Redfin.

Three years earlier, during the summer of 2019 before the pandemic-era housing boom, the median down payment was just under $33,000.

In other words, the typical down payment rose by 100% during that three-year span. Meanwhile, home prices were also soaring, but not nearly as quickly, increasing by about 38% during the three years ending in July 2022, Redfin reported.

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Why down payments rose so much

For most of the pandemic, the housing market sizzled. Offers came in fast, bidding wars were common, homes were often selling for above list price — and down payment amounts climbed higher and higher.

When sellers have multiple offers, a large down payment can signal that the buyer is serious and has the means to close the purchase, according to Redfin. As the housing market grew more competitive, the typical down payment soared as buyers put more money down to increase their chances of sealing the deal.

Prior to the pandemic, the typical down payment was about 10% of the purchase price of a home. That percentage peaked at 18% in May and stood at 15% in July, according to Redfin.

Experts at Realtor.com came to similar findings in a May analysis, reporting that down payments rose faster than home prices from the first quarter of 2020 to the first quarter of 2022. Some buyers were able to put up larger down payments because they were saving on things like entertainment and travel during the pandemic, while also receiving cash from stimulus check programs.

In the past year, down payments increased at the fastest pace in Nashville (39.7%), Newark, N.J. (36.4%) and New York City (34.8%), Redfin reports. Down payments declined or stayed flat in seven metros, most of which are California markets where home prices are cooling faster than they are in other areas of the country.

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What's next for home prices (and down payments)

The rise in down payment amounts helps illustrate how tough it has become for buyers to afford homes. For Americans who live paycheck to paycheck, coming up with a down payment is often the biggest barrier to buying a home.

Mortgage rates have soared in recent months, pricing buyers out of the market with the increased cost of borrowing money for a home purchase. Home prices are now falling at the fastest pace since the 2008 financial crisis, but prices are still up year-over-year. Combine expensive home prices and larger down payments with high mortgage rates and tight home supply in many markets, and you get a bleak situation for buyers.

For buyers looking for a home right now, the good news is that prices are dropping (slightly) and there’s less competition. So the days of needing to put up a disproportionally large down payment may be coming to an end, according to Redfin.

The median down payment dropped to $62,500 in July 2022, from $66,000 in June, according to Redfin, and further declines are likely.

“Homebuyers don’t need to make enormous down payments anymore because they’re much less likely to encounter bidding wars now that so many Americans have bowed out of the market,” Sheharyar Bokhari, senior economist at Redfin, said in the report. “While down payments will likely remain elevated above pre-pandemic levels, they’ll probably fall a bit in the short term.”

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