Redfin: Homebuyers’ average down payment rises to 16% of purchase price

Redfin’s report is based on county records from 40 major metro areas.

Higher mortgage rates that are hovering near 7% have also influenced homebuyers’ decisions. Some are opting to put more money down to reduce their monthly payments, Redfin said.

“While a larger down payment can lower monthly mortgage payments and help strengthen an offer in a bidding war, bigger isn’t always better,” Redfin senior economist Sheharyar Bokhari said in the report.

“Housing markets in much of the country have started tilting in buyers’ favor, allowing buyers to set the terms they want. That means house hunters don’t necessarily need to break the bank for a huge down payment if it makes more financial sense to save some money for things like future home renovations or other investments.”

Cash purchases still common

Cash buyers accounted for 30.6% of U.S. home purchases in December, down from 33.8% a year earlier but up from a three-year low of 28.6% in September.

The share of cash buyers peaked in 2023 when mortgage rates hit a two-decade high of nearly 8%. As rates have since stabilized in the 6% to 7% range, fewer buyers are choosing to pay in full upfront. And real estate investors, who often purchase homes in cash, have also pulled back from the market.

For the full year of 2024, Redfin reported that 32.6% of home purchases were made with cash, the lowest share in three years.

FHA, VA loan usage is stable

Federal Housing Administration (FHA) loans, commonly used by first-time buyers and those with smaller down payments, accounted for 15% of mortgaged home sales in December, down slightly from 15.9% a year earlier. And U.S. Department of Veterans Affairs (VA) loans made up 6.7% of home sales, up from 6.2% a year ago, illustrating rising demand among military service members and veterans.

More buyers are now using FHA loans compared to late 2021 and early 2022, when fierce competition and high down payment offers made it harder to secure a home with government-backed financing. The continued rise in home prices has also made FHA loans a more attractive option for buyers struggling to afford larger down payments.

Conventional loans remain the dominant choice for homebuyers, making up 78.4% of all mortgaged home sales in December, a slight increase from 77.9% a year earlier.

Metro-level trends

Down payments were highest in San Francisco, where buyers put down an average of 26.4% of the purchase price. It was followed by two other California cities, Anaheim and San Jose, at 25% each. The lowest down payments were found in Virginia Beach, Virginia (3%); Detroit (6.5%); and Baltimore (8.5%).

FHA loans were most common in Riverside, California (25.4% of mortgaged sales), followed by Providence, Rhode Island (25.1%), and Las Vegas (24.3%). They were least used in San Francisco (2.1%), San Jose (2.2%) and Anaheim (5%).

VA loans were most prevalent in metros with a strong military presence, including Virginia Beach (39%), Jacksonville (16.3%) and Washington, D.C. (14.3%). The lowest shares were in California’s Bay Area, with less than 1% of San Jose sales utilizing VA loans, followed by San Francisco (1.5%) and Oakland (1.8%).

All-cash purchases were highest in West Palm Beach, Florida (50.4%), Cleveland (46%) and Jacksonville (39.3%). They were least common in Oakland (16.2%), San Jose (17.8%) and Seattle (18.8%).