Homebuyers' Down Payments Shrink For The First Time In Two Years, Even As Prices Rise
Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.
The typical homebuyer's down payment has shrunk by 1% year-over-year according to a new report from Redfin (NASDAQ:RDFN). This is the first annual decline in almost two years.
Median down payments now sit at $62,428, or 15% of the total home value. That percentage hasn't meaningfully gone down— a year earlier it was 15.1% — but the dollar amount has.
According to the report, the last time dollar-amount down payments decreased was in the summer of 2023. At that time, home sale prices were shrinking, resulting in lower payments. Now, home prices are rising, jumping by 1.4% year-over-year in April.
Don't Miss:
-
Maker of the $60,000 foldable home has 3 factory buildings, 600+ houses built, and big plans to solve housing — you can become an investor for $0.80 per share today.
-
Peter Thiel turned $1,700 into $5 billion—now accredited investors are eyeing this software company with similar breakout potential. Learn how you can invest with $1,000 at just $0.30/share.
So what's keeping down payments from rising right along with home prices? It turns out there are a number of factors at play.
For starters, the way people are paying for homes is changing. According to Redfin, nearly one-third of buyers are paying in cash, meaning they aren't putting up a down payment. Those who are buying homes with a mortgage seem to be purchasing cheaper properties, which explains a lower dollar amount down payment.
As interest rates linger around 7% and economic uncertainties persist, Redfin found that prospective buyers were more sensitive to cost. Mortgaged homebuyers seem more inclined to keep additional cash in their bank accounts, rather than splurge on more expensive real estate.
Trending: Invest early in CancerVax's breakthrough tech aiming to disrupt a $231B market. Back a bold new approach to cancer treatment with high-growth potential.
Additionally, Redfin said that the number of buyers using Federal Housing Administration and Veterans Affairs loans to purchase homes has increased over the last year. Mortgaged sales using an FHA loan went up by 1.1% year-over-year, and those using a VA loan are at the highest level since 2020. These financing options require lower down payments, which helps to push the overall dollar amount spent on down payments.
Finally, as the overall housing market cools down and sellers begin to outnumber buyers, Redfin says that many homeowners are more willing to negotiate with buyers. These negotiations can include accepting lower down payments in order to capture a sale.
Content Original Link:
" target="_blank">
