Down payments are at a record high: Here's where buyers pay the most

(NewsNation) — Homebuyers are putting down more money than ever to soften the blow of high mortgage rates, and in some cities, $400,000 down payments are now the norm.

The typical down payment for U.S. homebuyers hit a record $67,500 in June, nearly 15% higher than a year earlier, according to a new Redfin analysis. That jump significantly outpaced the rise in home prices, which went up 4% year over year.

In several California cities, buyers are putting down much more. San Jose ($451,500) and San Francisco ($441,500) had the highest median down payments in the country. Anaheim ($300,000) ranked third, and Oakland ($195,000) ranked sixth.

Down payments are also higher in percentage terms, reaching almost 19% of the purchase price in June. That's up from 15% a year ago and the highest level in over a decade, Redfin found.

Elevated mortgage rates are driving the trend. By putting down more money upfront, buyers can lower their monthly payments. At 6.92%, June's average mortgage rate was near a 20-year high, and the typical monthly mortgage payment was $2,785.

Rising home prices are another reason buyers are putting more money down. Part of that is because homeowners are sitting on more equity, so when they sell, they have more money for their next down payment, Redfin noted.

In some markets, investors continue to play a role in driving up prices, often making all-cash offers to avoid paying interest.

It's no coincidence that buyers in the Bay Area put down a bigger share of the purchase price, 26%, than those in every other metro — many are competing with wealthy residents and deep-pocketed investors.

"San Jose has a lot of overseas investors buying sight-unseen, and a lot of home flippers who are purchasing dilapidated homes, putting some lipstick on them, and selling them for a profit," Craig Pellegrini, a Redfin Premier real estate agent in San Jose, said in a recent report.

In the second quarter of 2024, real estate investors bought 1 in 4 of the nation's most affordable homes, Redfin found.

Meanwhile, the share of home sales backed by Federal Housing Administration (FHA) loans fell to 13.7% in June, the lowest level since August 2022. Those loans are geared toward borrowers with lower credit scores and are more popular with first-time homebuyers.

The decline is a sign that Americans are struggling to afford homes in the current market's perfect storm of high prices, elevated mortgage rates and low inventory.

But there are still pockets of affordability. In Virginia Beach, the typical down payment was $9,195 in June, the lowest of all the major metros in the country. Redfin pointed out that the area has a high concentration of veterans using VA loans with little or no down payment.

Detroit ($16,000) had the second-lowest median down payment, followed by Cleveland ($26,850) and Pittsburgh ($28,000). Five of the ten cities with the lowest down payments were in Ohio or Pennsylvania.

As for the metros with the highest down payments, California cities made up seven of the top ten. Seattle ($206,950), New York City ($199,775) and Newark, NJ ($125,000) also made the list.

Redfin looked at county records across 40 of the most populous U.S. metropolitan areas in its analysis.

The 10 U.S. cities with the highest median down payments, according to Redfin:

1. San Jose, CA: $451,500
2. San Francisco, CA: $441,500
3. Anaheim, CA: $300,000
4. Seattle, WA: $206,950
5. New York, NY: $199,775
6. Oakland, CA: $195,000
7. Los Angeles, CA: $188,000
8. San Diego, CA: $183,500
9. Newark, NJ: $125,000
10. Sacramento, CA: $107,650

The 10 U.S. cities with the lowest median down payments, according to Redfin:

1. Virginia Beach, VA: $9,195
2. Detroit, MI: $16,000
3. Cleveland, OH: $26,850
4. Pittsburgh, PA: $28,000
5. Jacksonville, FL: $28,338
6. Philadelphia, PA: $28,350
7. Cincinnati, OH: $30,625
8. Columbus, OH: $35,000
9. Milwaukee, WI: $39,000
10. Tampa, FL: $39,773