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Down payments on homes are down 7.5% from last year

Higher interest rates have translated to more negotiating power for buyers. iStock / Getty Images

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In a sign that the housing market is cooling off, down payments are shrinking. Analysis by the real estate brokerage company Redfin finds the average U.S. homebuyer these days is putting down just 10% of the total price. That’s down from a peak of 17.5% in spring of 2022. 

A year ago, the typical prospective home buyer had a lot of competition.

“Last spring was an incredible market,” said Jessica Lautz with the National Association of Realtors. 

She said the average listing was getting five offers, and in some especially hot markets, it was more like dozens. 

And offering a hefty downpayment was a way of telling the seller, ‘I’m a safe bet.’ 

“If you put down a large down payment or pay all cash, you’re gonna float to the top of a multiple offer situation,” said Lutz.

Plus, people had more money to put down, thanks to stimulus checks and lockdown savings, says Redfin chief economist Daryl Fairweather. But high interest rates have cooled the market and changed the down payment calculus. 

“Now sellers are much more willing to accept an FHA loan or a VA loan or another low down payment loan,” she said.

That’s the silver lining for first time and low-income home buyers, Fairweather added. The catch? Higher interest rates mean they’ll face higher monthly mortgage payments. 

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