Homebuyer down payments more than doubled during the pandemic, a new report from Redfin found.
The typical U.S. homebuyer who took out a mortgage in July made a $62,500 down payment. That’s up 13.6% from a year earlier and almost twice the average $32,917 down payment in July 2019. Of course, this spike makes it even more difficult for already-strapped homebuyers to pursue a purchase.
But down payments have dropped recently after peaking at $66,000 in May and June. According to Redfin, that’s partly because of the cooling market. It’s also due to a lack of competition. All this adds up to buyers not having to come up with such a high down payment to stay in the game.
The typical buyer’s down payment in July was equal to 15.2% of the purchase price. That is essentially unchanged from 15% a year earlier. That said, it’s still up from 10% before the pandemic, Redfin found.
Down payment amounts hit a nine-year high in May. They reached 18% of a home’s purchase price before the housing market started to balance.
“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,” said Redfin Senior Economist Sheharyar Bokhari. “And many buyers can no longer afford to put down 15% or 20% of the purchase prices.”
Of the 40 metros analyzed:
- Nashville had the largest typical down payment increase in July at $64,250, up 39.7% from a year earlier
- Newark, NJ was in second place at $90,000, up 36.4% year over year
- New York City was up 34.8% at $197,875
- New Brunswick, NJ came in at $90,000, up 34.3%
- Charlotte, NC was in fifth place at $48,200, up 32.6%.
Down payments fell from a year ago or stayed the same in seven of the 40 metros in this analysis, mostly in California, according to the report.