Down payment size down 10% from last year

The typical home purchaser is putting 10% fewer dollars down as the market slows and  reduced competition shifts dynamics, Redfin said.

During January, the typical buyer made a $42,375 down payment. It's the third consecutive month this has shrunk and it marks a 10% decline from the same month in 2022. This is also a drop of 35% from the peak month of June, but it's 30% above levels prior to the pandemic, Redfin pointed out.

The median amount put down on a percentage basis was 10% of the purchase price, the lowest share since early 2021. In January 2022 the median down payment was 13.6% of the purchase price.

A Redfin study from February 2022 found that many Americans banked their pandemic savings to use as a down payment and that likely fueled some of the higher numbers seen in the middle of last year.

"One silver lining of high mortgage rates and economic turmoil is that they've slowed competition," said Sheharyar Bokhari, Redfin senior economist in a press release. "That means buyers are often able to purchase a home without facing a bidding war and don't need to fork over a huge portion of their savings for a down payment to grab sellers' attention."

If anything, more sellers are offering concessions to get the deal done, Bokhari continued.

Home prices are still high, although dropping, which cuts both ways. Because of inflation, potential buyers don't have as much money to put down on a property. But lower prices means buyers need less cash for a down payment.

In addition, a larger share of borrowers are turning to low down payment government lending programs. The Federal Housing Administration mortgage insurance program had 16% of the market in January, the highest share since April 2020. That is up from 13.3% on a year-over-year basis.

In January the Veterans Affairs program, in which borrowers do not have to make any down payment, had its highest share in nearly two years at 7.5%, versus 6.1% one year earlier.

While many sellers have been reluctant to accept offers from buyers using these programs, in a less competitive market they might not have as much choice, Redfin said.

The information is derived from Redfin's analysis of property transaction records in 40 of the most populated metros in the U.S.

All-cash buyers reached their highest share in nine years, at 32.1%. That was up from 29.7% one year earlier. During the recent boom, buyers were making all cash offers to beat the competition. Now the majority of these offers come from those who have the means to avoid paying higher mortgage rates, Redfin said.