Bigger Down Payments Continue in Q4 2024
The typical Q4 down payment was $30,250, slightly below Q3 but $3K higher year-over-year. Higher home prices and rates were keeping down payments elevated.
AUSTIN, Texas — The typical down payment in the fourth quarter was $30,250, according to a new report from Realtor.com, ever-so-slightly below the third quarter's level but roughly $3,000 higher than one year prior. Last year saw the highest down payments in the data's history, both as a dollar amount and as a share of purchase price. Down payments were 3.4 percentage points higher than pre-pandemic (2019 Q4) in the fourth quarter of 2024, emphasizing the trend towards bigger down payments.
"As inventory recovers, the housing market is very slowly tilting toward more balance between buyers and sellers. But down payments are still high – hitting an annual record in 2024," said Danielle Hale, chief economist, Realtor.com. "Today's home sales are skewed toward higher-end homes, and this means larger down payments from more financially prepared, high-earning buyers as entry-level and lower-earning buyers sit out. Additionally, higher mortgage rates give homebuyers good reason to limit their loan size and interest costs, by putting more down upfront. As long as the market remains tilted toward buyers who are less sensitive to home prices and mortgage rates, down payments are likely to remain relatively high."
Buyers paid 14.4% as a share of purchase price and $29,900 on average in 2024, up from 14.2% and $27,200 in 2023, and as the housing market is not expected to shift dramatically in coming months, recent down payment trends are likely to persist.
Homebuyers utilize pandemic-era savings and home equity
Homebuyers have been utilizing pandemic-era savings to fuel consumer spending and larger down payments. In the three years before the pandemic, consumers saved 6.5% of their disposable income; however, during the pandemic that number spiked to over 30% and was above the pre-pandemic norm for more than 20 months.
Despite a lower savings rate since the pandemic highs, which would normally suggest buyers would have a harder time saving for a large down payment, the typical down payment dollar amount is still more than double the pre-pandemic median, and the typical down payment as a share of purchase price was more than 3 percentage points higher.
Still-large accumulations of pandemic savings likely help some homebuyers, especially buyers who also have the benefit of near-record high existing home equity that can boost a down payment, as well.
Down payment trends vary by home price point
Housing activity is growing in the high-priced segment while shrinking in lower-priced segments, which has pushed the median sale price and median down payment amount higher. Home sales picked up in the $750,000-plus price range in 2024, by 7.4%, while fewer homes sold for less than $750,000 compared to 2023, down 9.3%.
Modest down payments, those typically used by a first-time home buyer or buyers utilizing government-backed loan options such as FHA or VA-loans, saw growth in payments as well, but are below the pandemic peak.
In the fourth quarter of 2024, the 30th percentile down payment, a good proxy for modest down payments, was $8,200, less than one-third of the median down payment amount, up 6.5% year-over-year, but down from the peak in the second quarter of 2022 at $10,300. The highly competitive pandemic-era market pushed even the low end of down payments much higher as buyers paid more as a means of competition and as a result of the pandemic-era boost in savings. Pre-pandemic 2019, the typical modest down payment was $4,600, nearly $4,000 below what was seen in 2024.
"As mortgage rates ease, a more diverse set of buyers, in terms of budgets, will likely enter the market, and the incentive to minimize their home loan will soften," said Hale. "However, if for-sale inventory fails to keep up with increased buyer demand, down payments could climb once again as the result of increased competition."
Methodology
Down payment trends analyzed at the national- and top-150-metro-level through Q4 of 2024 using Optimal Blue data. Down payment as a share of sale price is calculated as an average across the data. Down payment as a dollar amount is calculated by taking the median across the data. All comparisons are between the fourth quarter of the current and previous years unless otherwise stated. 'Modest' down payments are approximated as the 30th percentile by down payment amount and down payment share.
Source: Realtor.com
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