Homebuyers made larger down payments as mortgage rates surged in Q3: Realtor.com

Homebuyers are forking over larger down payments to offset higher borrowing costs thanks to mortgage rates hitting multi-decade highs.

On average, homebuyers put down 14.7% of the home’s purchase price for a primary home in Q3, up from 13.6% one year ago, according to a Realtor.com report. The median down payment was $30,000 in Q3, up from $27,300 the same quarter a year ago.

Meanwhile, the median home sales price grew 25.4% between Q3 2020 and Q3 2023, making the increase in down payment size even more significant. 

Typical down payments for vacation/second homes and investment properties were 28.2% and 28.3%, respectively, in Q3 2023, up from 26.6% and 26.8% the same quarter a year ago. The typical down payment on a second home or investment property was more than double that of a primary residence in the third quarter.

Realtor.com found that the typical down payment as a percentage of a home’s purchase price increased in all states, except for Idaho, Arizona, Texas and Utah. Washington, D.C., Montana, Connecticut and Rhode Island posted the highest gains in down payment amount as a percentage of the purchase price.

Northeast markets also performed well as buyers looked to invest their housing dollars in New York City and Boston. The typical down payment as a dollar amount increased in all states except 11 in the South and West.

Faced with affordability challenges, many prospective homebuyers are being priced out of the housing market. Those who are still competing are in a financially stronger position to offer larger down payments. The current high-rate environment is also incentivizing buyers to pay a larger sum upfront to lower their overall borrowing costs.

 “As long as housing market competition continues, down payments are likely to remain elevated,” Realtor.com Senior Economic Research Analyst Hannah Jones said in the report.

“Shoppers looking to navigate these trends may find that relatively affordable markets offer the opportunity to achieve homeownership and limit interest payments by using their existing savings to put a larger amount down as a down payment on a home.”

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