Moderating mortgage rates and lessening buyer competition have pushed the U.S. median down payment down 7.33 percent over the past year, according to Realtor.com.
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Moderating mortgage rates have given way to more modest down payments, according to data released Tuesday in Realtor.com’s latest market report.
The typical homebuyer offered a down payment of $30,300 in the third quarter — 7.33 percent below the historical peak of $32,700 seen a quarter earlier. Realtor.com Senior Economic Analyst Hannah Jones said seasonal declines in buyer demand contributed to the decline, creating more financial flexibility for buyers who favor shorter days and cooler weather in search of their dream home.
Hannah Jones | Credit: Realtor.com
“Easing demand and increasing inventory gave buyers more flexibility last quarter, which led to slightly lower down payments,” Jones said. “The recent drop in mortgage rates could pave the way for more competition in the coming months, especially if rates fall further, but we haven’t yet seen that reflected in home sales or down payment trends.”
Down payments as a share of purchase price declined in 24 states in the third quarter, with the District of Columbia (-3.80 percentage points), Florida (-1.70 pp), Idaho (-1.10 pp), Alaska (-1.10 pp), and Montana (-1.10 pp) leading the way in annual declines.
Meanwhile, down payment dollar amounts fell in 21 states, with homebuyers in the District of Columbia (-$17,400), Montana (-$9,600), Florida (-$8,500), Wyoming (-$7,200) and South Dakota (-$6,200) peeling back the most on their down payments.
On the other hand, homebuyers across the Northeast experienced increases in the share of purchase price and dollar amount. Maine (+1.8 percentage points) and Rhode Island (+1.8 pp) saw the largest jumps in down payments as a share of purchase price, with the typical homebuyer putting down 17.8 percent and 18.4 percent, respectively.
When it comes to the dollar amount, homebuyers in Rhode Island (+$15,000) and Maine (+$13,200) have tacked on the most, pushing their respective median down payments to $60,400 and $53,600.
Jones said U.S. median down payment trends will likely rebound in coming quarters, as favorable mortgage rates boost seller activity and buyer demand. However, historically affordable markets will continue to offer homebuyers a break on home prices and down payments.
“It is too early to tell if this is the beginning of a lasting downward trend in down payments. While down payments have started to trend lower with lower demand, they remain historically high,” she said. “Easing mortgage rates may bring more buyers back into the market, potentially increasing competition – and down payments – once again if for-sale inventory fails to keep pace with demand.”
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