Down payments for homes decrease as buyer competition eases

Danielle Hale Chief Economist | realtors.com

Homebuyers may find some relief as down payments are decreasing from their recent historic highs. According to a report by Realtor.com®, the median down payment from July to September 2024 averaged 14.5%, equating to $30,300. This represents a $2,400 reduction from the previous quarter's peak of $32,700, or 14.9%.

Hannah Jones, a senior economic research analyst at Realtor.com, explains that fewer homebuyers in the market have given those who are buying more leverage. "The annual decline in down payments is the result of less buyer competition in the third quarter," she says. "Easing demand and increasing inventory gave buyers more flexibility last quarter, which led to slightly lower down payments."

The findings were based on an analysis of down payment trends across the U.S., individual states, and the top 150 metropolitan areas up to the third quarter of 2024 using data from Optimal Blue.

In terms of state-level changes, down payment amounts fell in 21 states during this period. Notably affected were pandemic-era hot spots like Texas and Florida. Jones notes these areas "have seen significant softening over the last year as waning demand and climbing inventory impact home prices and reduce competition." Florida experienced a 24% drop year over year to $27,000; Texas saw a decrease of 23.2% to $14,400.

Metropolitan areas with smaller down payments tend to be more affordable with ample housing stock. Jones mentions that these metros had between 19% and 37% more housing availability compared to last year. San Antonio, TX, and Virginia Beach, VA—both military markets—had some of the smallest average down payments due to options like VA loans.

Conversely, states in the Northeast and Midwest saw increases in down payments due to heightened buyer demand driving up competition and prices. Rhode Island experienced a notable increase from $45,300 to $60,400—a rise of $15,000 or 33.8%.

California remains prominent among metros with high down payment amounts due to its expensive housing markets. San Jose leads with an average homebuyer putting down about $312,000 or 27.7% of the purchase price.

Jones points out that while there is a downward trend in down payments now, they remain historically high overall: "With many buyers opting out of the home purchase market altogether...those left are likely better positioned to make a larger down payment." She suggests that if mortgage rates ease and inventory doesn't keep pace with demand growth, down payments could rise again.