Buying conditions may be tough, but homebuyers are coming to the table with bigger down payments.
The US median down payment increased 11.3% year over year in the third quarter to $30,434, marking the highest total since Realtor.com started tracking the data in 2013. The average down payment percentage reached 14.71% of the purchase price in the same period, also the highest in the last decade.
The trend suggests that homebuyers in today’s market have the incentive and means to contribute large payments. They are leveraging their wealth — whether it is equity or cash — to beat out competitors without the same access.
"The people who are able to play ball in this interesting market are more likely to be higher earners," Hannah Jones, economic research analyst at Realtor.com, told Yahoo Finance. "Also because inventory is so tight and mortgage rates are so high, it's creating a more competitive environment where people are more likely to put more down as a means of competition because there's such limited inventory on the market."
The median down payment amount grew 118% in the last four years to nearly $30,500 in the third quarter from $13,937 in the third quarter in 2019 before the pandemic began, according to Realtor.com’s data.
The surge can partly be attributed to rapidly rising home prices during the pandemic. The US median home price increased by nearly 40% to $373,253 in the third quarter from $266,861 in the same period in 2019.
The average percentage of deposit as a share of home price also grew. Since 2013, the average annual share of down payment was 11.39%, but that number climbed after the start of COVID to 12.75% and hit 14.71% in the third quarter, suggesting buyers are starting their homeownership with more equity in hand.
Today’s homebuyers have good reasons to bump up their stake in their new homes. For starters, they want to beat out other offers by presenting themselves as less risky buyers.
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