People are forking out bigger sums of money for a down payment on their home

Amid fierce competition in the US housing market last year, homebuyers increased their down payments to a record $66,000 in May, according to a new report.

Down payments peaked in May, hitting a nine-year high when the typical down payment was 18% of a home’s purchase price, according to a report by real estate agent Redfin.

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In May and June, the typical buyer paid $66,000, Redfin said

But that number has cooled slightly since then. Redfin also said the typical US homebuyer who took out a mortgage in July 2022 put down a $62,500 down payment.

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That is still 13.6% more than a year ago. And compared to the average amount people deposited before the pandemic of $32,917 in July 2019, the typical deposit has doubled.

Nearly 60% of mortgage buyers had more than 10% down payment, up from the 50% range before the pandemic.

(redfin)

Where deposits have increased the most

Of the top 5 cities where deposits grew the most, the East Coast dominated the list.

Dollar deposit amounts increased the most in Nashville, Tenn., by almost 40% year-over-year. The typical deposit in July was $64,250.

It follows:

  • NEWARK, NJ – The typical deposit was $90,000 in July, up 36.4% from a year ago

  • New York City, NY – The typical deposit was $197,875, up 34.8% from a year ago

  • New Brunswick, NJ – The typical down payment was $90,000, up 34.3% from a year ago

  • Charlotte, NC – The typical down payment was $48,200, up 32.6% from a year ago.

But deposits fell in many cities across the US, particularly in the west.

Down payments fell the most in Riverside, Calif., down 15.4% year over year to $55,000.

In San Francisco, too, people put down $364,000, down 7.8% from a year ago.

Oakland, California, Warren, Mich., Detroit, Mich. and Seattle, Washington followed.

In terms of percentages, the typical Denver home buyer was the most aggressive, down 20% in July, according to Redfin.

That’s more than the typical Denver buyer, who was down 15% a year ago.

Expect deposit amounts to drop again

Higher mortgage rates are partly the reason down payments have fallen.

“Higher monthly mortgage payments and the rising cost of other goods and services are taking a toll on buyers’ budgets, making it harder to meet huge down payments,” Redfin said.

Redfin also added a feature to its website on Wednesday that shows users information about down payment help attached to home ads. Future sales listings on Redfin will include programs in the area that prospective homebuyers can leverage for down payment assistance.

But a slowing housing market means people don’t have to make large down payments to win bids on homes, Redfin noted.

“Homebuyers will no longer have to make huge down payments because they will be much less likely to encounter bidding wars after so many Americans have pulled out of the market,” said Sheharyar Bokhari, senior economist at Redfin, in a blog post.

“Although deposits are likely to be above pre-pandemic levels, in the short-term they are likely to decline somewhat,” he added.

Do you have thoughts about the housing market? Write to MarketWatch reporter Aarthi Swaminathan at [email protected]

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