Millennial homebuyers bring down payments below 20%
Putting down 20% of the sales price has been the industry standard when buying a house, but less than half of consumers do that much, according to Zillow.
Millennials make up the largest group of buyers and are shifting the trends. Median down payment amounts reached an 18-year high in the third quarter and the time its taking people to save is the longest since the housing bubble. All these factors are why down payment percentages are shrinking.
"Saving up for a down payment can be tough and requires good budgeting and long-term planning, especially when for many of us the cost of rent and everyday life outpaces what we're able to put in the bank. Even if you don't have plans to buy a home in the next year or two, it never hurts to start setting aside savings for a future home purchase," Aaron Terrazas, senior economist at Zillow, said in a press release.
The median home value nationwide is $221,500 and 43% of buyers put down 20% or more. On the other end of the spectrum, 24% of buyers get into a more precarious situation of putting down 5% or less.
"There are many mortgage options that require less than 20% down, but buyers should be careful that they don't set themselves up to be underwater. Interest rates are rising, of course, but for many, waiting a bit longer and saving for a larger down payment might still be the way to go as they weigh their current stability and housing needs against their long-term futures," Terrazas continued.
In a traditionally hot housing market like San Francisco, the median home value is just under $1 million and 51% of buyers put down 20% or more while 18% do 5% or less. Atlanta's split is the inverse, with 32% putting down 20% or more and 44% at 5% or less.