2023-11-15 13:02:22
The spring and summer, though sluggish, adhered to many of the typical seasonal housing market patterns amid elevated mortgage rates and still-high home prices. Waning affordability stifled buyer demand, but limited for-sale inventory kept home prices buoyant. As a result, buyers and sellers both faced challenges, making for a toned down ‘buying season’, especially compared to the red-hot pandemic-era market. Home sales prices fell compared to the previous year from November 2022 through June 2023. As sale prices fell, so did the typical down payment, though the decline was shorter-lived, with annual declines in down payment dollar amount falling just in January through May 2023. However, the median US down payment dollar amount climbed to a new peak in July 2023, as home prices steadied and the typical down payment as a percent of purchase price peaked in August.
Key Takeaways:
Down payments reached a new peak in the third quarter of 2023 with an average 14.7% down payments and a median down payment amount of $30,000.
Sale amounts and down payments remain higher than pre-pandemic. Both climbing mortgage rates and general market dynamics are driving buyers to put more down.
Down payments on second homes and investment properties, which have typical down payments of 28.2% and 28.3%, respectively, in Q3 2023 are roughly double the typical share of down payments on primary residences. Measured in dollars, down payments for second and investment homes are more than two times larger than for primary homes.
Locally, popular pandemic destinations such as metros in the South and West, as well as military communities where VA loans have become more common saw down payments shrink while well-located Northeast metros where housing markets remain more competitive saw down payment growth.
Down Payments Climb Nationwide as Mortgage Rates Increase
In general, at the state-, metro- and country-level, buyers increased down payments in Q3 of 2023 over the previous quarter and previous year. During the pandemic, down payments climbed as home prices grew and buyers used down payments to compete in multiple-bid situations. However, home price growth slowed over the last year as mortgage rates continued to rise and buyer demand fell, making growing down payments somewhat counter-intuitive, but consumer savings trends and housing market competitiveness help explain the finding.
Home shoppers faced limited for-sale inventory as homeowners opted to stay put rather than list their homes for sale amid elevated mortgage rates. Fewer homes for sale meant more buyer competition, which led to higher down payments as buyers utilized their pandemic-era savings to win multiple-bid scenarios. High mortgage rates also drove buyers to consider larger down payments to minimize the size of their mortgage loan at today’s elevated rate.
Accumulated Savings Continue to be a Factor Even As Savings Rates Are Below Historic Average
In the three years before the pandemic, the US personal savings rate averaged 6.5%, meaning that on an aggregate basis, consumers saved 6.5% of their disposable income. The relatively high personal savings rate during the pandemic–which spiked to over 30% and was above the pre-pandemic norm for 20 months–contributed to a build up in savings which in turn fueled consumer spending as well as larger down payments.
Although the personal savings rate fell through 2022 as high housing costs and high inflation weighed on consumers, eventually dipping below the pre-pandemic norm as consumers right-sized their savings. However, in the first three quarters of 2023, this savings rate recovered from the previous year’s low, but still remained at an average 4.6%, lower than pre-pandemic.
A lower savings rate over the last two years suggests that buyers would have a harder time saving for a large down payment. However, on average year-to-date, the typical down payment dollar amount was more than double the pre-pandemic median, and the typical down payment as a share of purchase price was 2.9 percentage points higher. Still-large accumulations of pandemic savings likely help some homebuyers.
Mortgage Rates Restrict Housing Supply Alongside Demand, Keeping Many Markets Competitive
In the third quarter of 2023, mortgage rates ascended to multi-decade highs, which pushed more buyers out of the market and convinced homeowners to hold off on listing their home for sale. As a result, many of the buyers left in the market were in a better position to buy, whether due to high income or existing home equity. Additionally, the low inventory environment put pressure on buyers to compete via higher down payments, a practice that became popular during pandemic times.
Nationwide Down Payments Hit New Peaks
At the US-level, in 2019 and in 2020, buyers were paying an average 11.0% down payment on primary residences. In 2021, this grew to an average 12.3% down payment, and in 2022, buyers paid an average 13.6% as a down payment. By Q3 2023, buyers were paying an average 14.7% down for a primary residence, almost one percentage point more than just one year prior. The sustained down payment size in 2023 is especially significant when considering the 25.4% median sale price growth in Q3 2023 compared to Q3 2020.
A larger percent down on typically higher priced homes means the buyers paid 78.2% more as a down payment in the third quarter of 2023 ($30,400) compared to Q1 2020 ($17,000). Buyers paid the most as a down payment, both as a dollar amount and as a share of the purchase price, in the third quarter of 2023, exceeding the previous peak in the second quarter of 2022.
Primary Residence
Avg Down Payment as % of Purchase Price
Med. Down Payment ($ amt)
2020 Q3
2021 Q3
2022 Q3
2023 Q3
2020 Q3
2021 Q3
2022 Q3
2023 Q3
United States
11.5%
12.5%
13.8%
14.7%
$17,000
$22,300
$27,300
$30,400
State Level Trends Mirror U.S. Trends, Going Up with Few Exceptions
At the state-level, the typical down payment increased as a percent of purchase price in all except for four states in Q3 2023. The typical down payment as a dollar amount increased in all but 11 states. The increase in payment as a percent of price increased the most (3.1 percentage points) from 17.8% to 20.9% in DC in Q3 2023, followed by Alaska, Montana, Connecticut and Rhode Island. Washington DC, Montana, Connecticut and Rhode Island are hotspots for high-earners. All three locales saw higher-than-typical down payments; these markets are more likely to draw in buyers with high incomes who are able to compete with a down payment. The Northeast locales have been especially popular over the last year as buyers look for bang for their buck near New York, Boston and other business hubs. Alaska, on the other hand, sees lower-than-typical down payments, which increased from 9.5% in Q3 of 2022 to 12.2% in Q3 of 2023.
States with Largest Down Payment Growth in 2023 (%)
State
2022 Q3
2023 Q3
2023 Change
District of Columbia
17.8%
20.9%
3.1 ppt
Alaska
9.5%
12.2%
2.7 ppt
Montana
18.3%
21.0%
2.7 ppt
Connecticut
14.0%
16.6%
2.6 ppt
Rhode Island
14.1%
16.6%
2.5 ppt
In Q3 2023, down payments fell in 4 states: Idaho, Arizona, Texas and Utah. While these four states saw annual declines, none exceeded 1 percentage point. Down payments, both as a share of purchase price and as a dollar amount, decreased the most in Utah. Down payment percent decreased by 0.8 percentage points in Utah, falling to 16.4%, while the dollar amount fell 19.9% in Q3 2023 year-over-year.
States with Largest Down Payment Decline in Q3 2023 (%)
State
2022 Q3
2023 Q3
2023 Change
Utah
17.2%
16.4%
-0.8 ppt
Texas
12.6%
12.2%
-0.4 ppt
Arizona
15.7%
15.4%
-0.3 ppt
Idaho
20.3%
20.2%
-0.1 ppt
As a percent of down payment dollars, the largest increase occurred in Connecticut in Q3 2023, where the typical down payment increased by 54.7%, from $30,600 in Q3 2022 to $47,300 in Q3 2023. Measuring in this way, drivers include both the increase in down payment and the median listing price increase, and the list is split between areas with lower dollar down payments where percent change is larger and higher down payments in competitive, high-priced markets. The largest dollar amount increase occurred in Washington DC, where the median down payment increased by $23,000, from $64,000 in Q3 2022 to $87,000 in Q3 2023, but compared to the previously large down payment in this area, this jump was ‘only’ a 35.9% increase.
States with Largest Down Payment Dollar Growth Q3 2022-2023
State
Q3 2022
Q3 2023
Q3 2023 Change
Q3 2022
Q3 2023
Q3 ’23 Change (%)
Connecticut
14.0%
16.6%
2.6%
$31,000
$47,000
54.7%
Alaska
9.5%
12.2%
2.7%
$14,000
$21,000
53.8%
Rhode Island
14.1%
16.6%
2.5%
$30,000
$45,000
50.0%
Nebraska
13.3%
15.4%
2.1%
$20,000
$30,000
48.4%
Virginia
11.4%
13.5%
2.1%
$20,000
$30,000
46.2%
The typical down payment amount decreased in 11 states between Q3 2022 and Q3 2023, mostly due to decreasing sale amounts. Southern and Western states saw the largest decrease in down payment size with Utah, Texas, Oklahoma, Arizona and North Dakota seeing the largest declines. As noted above, Utah, a popular vacation home market, not only saw the biggest decline in down payment as a percent of purchase price, it saw the biggest percent change (-19.9%) and drop measured in dollars, with the typical down payment shrinking by nearly $11,000.
States with Largest Down Payment Dollar Decline Q3 2022-2023
State
Q3 2022
Q3 2023
Q3 2023 Change
Q3 2022
Q3 2023
Q3 ’23 Change (%)
Utah
17.2%
16.4%
-0.8%
$54,000
$43,000
-19.9%
Texas
12.6%
12.2%
-0.4%
$23,000
$19,000
-19.4%
Oklahoma
12.2%
12.3%
0.1%
$15,000
$13,000
-12.8%
Arizona
15.7%
15.4%
-0.3%
$38,000
$34,000
-9.9%
North Dakota
13.8%
15.0%
1.2%
$27,000
$25,000
-8.3%
Growing Down Payments in Northeast Markets
As home prices and mortgage rates remain elevated, buyer demand has shifted to relatively affordable locales in the Midwest and well-located Northeast markets. As a result, affordable metros in the Northeast saw the largest down payment growth between Q3 2022 and Q3 2023 as buyers were able to both make a more competitive offer and limit the amount of loan they had to pay interest on by paying a larger down payment on a relatively affordable home. The top 3 markets by down payment growth were the Portland-South Portland, ME, New Haven-Milford, CT, and Bridgeport-Stamford-Norwalk, CT metro area markets, where down payments as a percent of purchase price grew by 3.5 to 3.9 percentage points between 2022 and 2023, reaching an average 18.5% down payment.
In general, the markets that saw the largest down payment growth by share of sale price are markets that have seen significant price growth over the last few years. These markets have grown increasingly popular leading to more buyer competition, more severe price growth, and more upward pressure on down payments as both a means of competition and a way to reduce loan size amid elevated mortgage rates.
Metro-level Fastest Growing Down Payments (as % of purchase price)
Median Down Payment as % of Purchase Price
Med. Down Payment ($ amt)
Metro
2021 Q3
2022 Q3
2023 Q3
2023 YY
2021 Q3
2022 Q3
2023 Q3
Portland-South Portland, ME
14.70%
16.60%
20.50%
3.90%
$38,000
$58,000
$79,000
New Haven-Milford, CT
10.90%
12.20%
15.70%
3.50%
$15,000
$20,000
$36,000
Bridgeport-Stamford-Norwalk, CT
14.80%
15.80%
19.30%
3.50%
$49,000
$56,000
$83,000
Allentown-Bethlehem-Easton, PA-NJ
11.20%
12.40%
15.40%
3.00%
$14,000
$20,000
$32,000
South and West Region Markets see Declining Down Payments
Looking instead at metros where down payments have fallen shows that early-pandemic boom towns, many in the sun belt, have seen down payments decline. The top 5 by down payment decline are the El Paso, TX, San Antonio-New Braunfels, TX, Ogden-Clearfield, UT, Riverside-San Bernardino-Ontario, CA, and Charleston, SC metros. These markets saw down payments as a share of purchase price decline by 1.1 to 1.8 percentage points. The pandemic-era boomtown of Austin, TX is also in the top 10. Several of these areas have sizable military communities, such as El Paso and San Antonio, TX. As a result, they see a higher prevalence of VA mortgage loans which enable buyers to make smaller down payments.
Metro-level Falling Down Payments (as % of purchase price)
Median Down Payment as % of Purchase Price
Med. Down Payment ($ amt)
Metro
2021 Q3
2022 Q3
2023 Q3
2023 YY
2021 Q3
2022 Q3
2023 Q3
El Paso, TX
6.40%
7.40%
5.60%
-1.80%
$5,000
$5,000
$5,000
San Antonio-New Braunfels, TX
9.10%
10.10%
8.60%
-1.50%
$10,000
$13,000
$6,000
Ogden-Clearfield, UT
14.80%
17.60%
16.40%
-1.20%
$37,000
$54,000
$40,000
Riverside-San Bernardino-Ontario, CA
13.10%
14.10%
13.00%
-1.10%
$32,000
$36,000
$31,000
Charleston-North Charleston, SC
12.20%
14.60%
13.50%
-1.10%
$22,000
$31,000
$25,000
Largest Down Payments in Expensive Metros
In 2023 Q3, the metro areas where buyers made the largest down payments were expensive west coast markets, plus one Florida market. The top 5 metros by percent down payment were San Jose and San Francisco, CA, followed by North Port-Sarasota, FL, Oxnard-Thousand Oaks-Ventura, CA and Los Angeles, CA. These top 5 markets averaged a 23.3% down payment in Q3 2023. The high-priced Boston and NYC markets were also among the top 10 by down payment size. However, in 3 of the top 5 markets, the down payment amount either shrank or stayed the same compared to the same time last year, signaling that home sale prices are softening in San Jose, North Port-Sarasota, and Oxnard-Thousand Oaks-Ventura.
These pricey metros tend to see large down payments as both interest rates and interest payments increase with larger loan amounts, incentivizing buyers to put down as much as possible to avoid these costs. Also, these high-priced locales tend to have wealthier, high-earning residents who have the funds to put more down on a home. In addition, these metros attract a higher than typical share of international buyers who are more likely to use cash, which presents a stronger offer in highly competitive markets.
Metros with Highest Down Payments Q3 2023
Median Down Payment as % of Purchase Price
Med. Down Payment ($ amt)
Share Internat’l Viewers
Cbsa Title
2021 Q3
2022 Q3
2023 Q3
2021 Q3
2022 Q3
2023 Q3
2023 Q3
San Jose-Sunnyvale-Santa Clara, CA
23.00%
23.40%
24.80%
246,833
260,083
235,183
3.3%
San Francisco-Oakland-Berkeley, CA
21.80%
21.80%
24.40%
209,526
195,874
202,575
2.9%
North Port-Sarasota-Bradenton, FL
19.60%
21.10%
22.90%
64,311
81,832
81,853
3.2%
Oxnard-Thousand Oaks-Ventura, CA
20.60%
21.30%
22.30%
139,550
143,250
142,800
1.6%
Los Angeles-Long Beach-Anaheim, CA
18.60%
19.40%
22.10%
109,271
103,111
152,275
5.0%
Primary Residence Down Payments Lag Investment/Secondary Properties
Primary residence down payments continue to lag investment property and second home down payments as a percentage of sale price. On average, investment properties saw down payments of 28.2% in Q3 2023, 1.4 percentage points higher as a percentage of purchase price than in Q3 2022. Second home down payments were typically 28.3% in Q3 2023, up 1.7 percentage points from Q3 2022. Though investment and second home purchases have become relatively less popular recently as home prices and mortgage rates have remained elevated, buyers who can afford these purchases opted to pay more as a down payment, perhaps due to non-primary home purchase requirements and to avoid higher interest payments. The typical down payment in dollars on a second home or investment property was more than twice as large as the typical primary residence down payment in Q3 2023.
Moving Forward
After losing ground in early 2023, down payments grew significantly towards the middle of the year, reaching a new peak both as a percent of purchase price and as a dollar amount in Q3 2023. WIth many buyers opting out of the market altogether, those left are likely better positioned to make a larger down payment, and incentivized to do so by high mortgage rates. After a period of slowing sale price growth, inventory scarcity created buyer competition and sale prices started to rise on an annual basis once again in the summer of 2023. As long as housing market competition continues, down payments are likely to remain elevated. 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.
Methodology:
Down payment trends analyzed at the national-, state- and top-100-metro-level through Q3 of 2023 using Optimal Blue data. Down payment as a share of sale price is calculated as an average across the data. Down payment as a dollar amount is calculated by taking the median across the data. All comparisons are between the third quarter of the current and previous years unless otherwise stated. International viewership data is from Realtor.com Cross-Market Demand data.
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