Of all the costs involved in owning a home, perhaps the most difficult is the first one: saving up for a down payment. And it gets harder and harder. According to a new report from Realtor.com, the national median down payment will go from about 12.5% ($23,300) in Q3 2021 to nearly 15% ($30,400) of the purchase price in Q3 2023. It has risen.
Rising home prices can lead to larger down payments, but there are other explanations as well. One is a competitive market where buyers bump up their down payments to gain an edge in bidding wars. Rising mortgage rates have encouraged buyers to put more cash upfront, borrow less, and save on their mortgage payments. Finally, personal savings increased during the pandemic, allowing buyers to keep more cash on hand.
The down payment change rate varies by region, according to the report. From Q3 2022 to Q3 2023, prices increased the most in expensive metros in the Northeast, especially those with more international buyers (who tend to bring more cash) . During the same period, down payments declined in the southern and western Sunbelt metropolitan areas. Many of these areas experienced a real estate boom due to the pandemic, but have since declined. Some also have military bases, which means more VA loans will be needed to offset the down payment. In El Paso, the median down payment fell the most over the past year, dropping by about 1.8% to 5.6% of the purchase price.
This week’s chart shows the five U.S. metros with the highest median down payments, measured as a percentage of the purchase price. San Jose, California, one of the most expensive areas in the country, had the highest median down payment of any metro area, at nearly 25% of the purchase price, or $235,183. Three other expensive California metros made the top five, as did the more affordable North Port, Fla., with a median down payment of 22.9% of the purchase price, or about $81,853.
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