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The typical down payment made by home buyers fell to its lowest level in nearly two years. The median down payment in January of $42,375 represented a 10% year-over-year drop and a 35% decline from peak levels in June 2022, according to a report from Redfin.

The median down payment in January represented 10% of the total purchase price, down from 13.6% a year ago and well below “the pandemic-era peak” of 17.5% in May 2022. While the typical down payment was at its lowest level since early 2021, Redfin says down payments remain 30% higher than pre-pandemic levels.

Lower down payments are a direct reflection of less competition in a slower housing market, cooling prices, and high housing-related costs and inflation, according to Redfin. As a result of houses receiving fewer offers, prospective buyers no longer need to present large down payment offers to “prove their financial stability and stand out from the crowd.” Additionally, since home prices are 10% lower than peak levels in May 2022, down payments from prospective buyers are also lower in dollar amount.

High mortgage rates and high levels of inflation are also leaving prospective buyers with less money to allocate toward a down payment. Redfin says many buyers are more cognizant of monthly payments and may be putting more cash toward a mortgage-rate buydown instead of a down payment.

“One silver lining of high mortgage rates and economic turmoil is that they’ve slowed competition,” says Redfin senior economist Sheharyar Bokhari. “That means buyers are often able to purchase a home without facing a bidding war and don’t need to fork over a huge portion of their savings for a down payment to grab sellers’ attention.”

Redfin says the diminished competition in the market is allowing more buyers to use FHA and VA loans, which typically allow for smaller down payments. Approximately 16% of mortgage home sales used an FHA loan in January, the highest share since April 2020, according to Redfin. The share of mortgage sales using VA loans also rose to a two-year high, climbing to 7.5% in January.

While reduced competition and market conditions are allowing buyers to put less money toward down payments, all-cash sales are still prevalent in the market. Nearly one-third of home purchases, 32.1%, in January were paid for with all cash, a 240-basis-point increase compared with January 2022 and the highest share in nine years, according to Redfin.