Down payments reached record highs in 2024, both in dollar amounts and as a share of purchase price, according to a new report from Realtor.com. The typical down payment in Q4 was $30,250, slightly below Q3 but about $3,000 higher than a year earlier.
"As inventory recovers, the housing market is very slowly tilting toward more balance between buyers and sellers. But down payments are still high — hitting an annual record in 2024," said Danielle Hale, Chief Economist, Realtor.com. "Today's home sales are skewed toward higher-end homes, and this means larger down payments from more financially prepared, high-earning buyers as entry-level and lower-earning buyers sit out. Additionally, higher mortgage rates give homebuyers good reason to limit their loan size and interest costs, by putting more down upfront. As long as the market remains tilted toward buyers who are less sensitive to home prices and mortgage rates, down payments are likely to remain relatively high."
In 2024, buyers paid an average of 14.4% of the purchase price, up from 14.2% in 2023. With no significant market shifts expected soon, this trend will likely persist.
Pandemic Savings and Home Equity Boost Down Payments
Homebuyers are still leveraging pandemic-era savings and home equity to make larger down payments. While the savings rate has declined since its pandemic highs, down payments remain significantly higher than pre-pandemic levels.
During the pandemic, consumers saved more than 30% of their disposable income, compared to the pre-pandemic average of 6.5%. This cushion has allowed some buyers to afford larger down payments despite the decline in savings rates. Additionally, homeowners with near-record levels of equity from rising home values are using that equity to fund their down payments.
Trends Differ by Price Point
Higher-priced home sales have grown, while lower-priced home sales have declined, driving up the median down payment. In 2024, sales of homes priced above $750,000 increased by 7.4%, while sales of homes priced below $750,000 dropped by 9.3% compared to 2023.
First-time buyers and those using government-backed loans, such as FHA or VA loans, are typically making more modest down payments. In Q4 2024, the 30th percentile down payment, often used as a measure of modest down payments, was $8,200. This is up 6.5% from the previous year but below the $10,300 peak in Q2 2022. Pre-pandemic, the typical modest down payment was $4,600, nearly $4,000 lower than in 2024.
"As mortgage rates ease, a more diverse set of buyers, in terms of budgets, will likely enter the market, and the incentive to minimize their home loan will soften," said Hale. "However, if for-sale inventory fails to keep up with increased buyer demand, down payments could climb once again as the result of increased competition."
