Median Down Payments For Homes in US Surge by 24.1%: Report

The median down payment for homebuyers in the U.S. has reached a new high putting more financial pressure on them. According to data from Redfin, the median down payment across the country stood at $56,000 in February marking a steep 24.1% increase from last year. This is the largest year-on-year increase since the post-pandemic levels in 2022.

Here are the US Metros with the Highest Downpayments

The Redfin report ranked the most populous metros of the country with the highest down payments. The top spot was occupied by San Francisco where home buyers are making the highest down payments by paying out a median of $383,500 in February. As per Redfin, this is a 9.6% increase from a year ago. The median down payment is so high that a typical buyer in the Golden Gate City is paying up to 25% of the price of the home as a down payment at this point.

San Francisco was followed by its neighboring city, San Jose, where the median down payment was $365,000. San Jose marked a surge of 24.9% in down payments since last year.

In addition to these two, the top 10 list of U.S. metropolitan areas with the highest down payments was dominated by five other California cities, including Anaheim where the median down payment was $259,800.

The other cities were Oakland with $181,000, Los Angeles with $173,000, San Diego with $152,000, and Sacramento with $82,750.

Meanwhile, New York City occupied the sixth spot on the list, with a median down payment of $172,250, marking an increase of 16% since last year, as per Redfin. Seattle also made a feature on the list at number 7 with a median rent of $165,400 marking a steep increase of 31% since last year.

Why are Down payments Soaring?

According to Redfin, down payments may be rising because of a surge in housing values during the pandemic. As more people sold properties at the time, it left them with more cash in hand to pay for the new property they are picking up now.

Furthermore, higher mortgage rates could also be a reason behind homebuyers putting down more money upfront. A large down payment can help buyers reduce the long-term monthly payments which in turn helps them ease costs.

Brian Durham, vice president of risk management and managing broker at Realty Group LLC and Realty Group Premier, told Fortune, “One way to offset that monthly payment is to increase the down payment and financing less.”

Homebuyers are doing exactly that. On average, a homebuyer in the U.S. is putting forward a downpayment of about 15% of the total property value which is up from 10% a year ago.

This is further supported by the report which also found that despite soaring down payment amounts, more homebuyers are making all-cash offers to pick up properties. Nearly 35% of all home purchases made in February were all-cash, the highest share since the pandemic, according to Redfin. Thus, even with home prices at record high levels, homebuyers are enticed by the prospect of having to pay less in the long term, the Fortune report suggests.

While the larger down payment helps buyers cut long-term costs, it’s also beneficial for sellers when it comes to choosing the applicant for their property.

However, the downside of soaring down payments is that first-time homebuyers are duly challenged. These buyers don’t have equity from a previous home sale thus, they struggle to put down large amounts upfront and are mostly unable to make an all-cash offer, according to Redfin.