At the end of 2023, down payments reached a historic high, but this trend changed at the beginning of 2024. According to the latest report from Realtor.com®, in the first quarter of 2024, homebuyers paid an average median down payment of 13.6%, approximately $26,000. This figure is a decrease from the previous quarter's $30,400, which accounted for 14.7% of the home price.

This means that homebuyers can save about $4,400 on down payments.

For those planning to buy a home in the spring, this is undoubtedly good news. Saving enough for a down payment is a significant challenge for many Americans, and a decrease in down payment requirements might lower this barrier.

Hannah Jones, a senior economic research analyst at Realtor.com, noted that the decrease in down payments could be due to an increase in housing supply over the past few quarters, which has reduced market competition. She also mentioned, "The decline in down payments between the fourth and first quarters also has seasonal factors."

To reach these conclusions, Realtor.com's economic team used data from Optimal Blue, analyzing down payment trends across U.S. states and the top 150 metropolitan areas through the first quarter of 2024. The team determined the down payment amount by calculating the percentage of the down payment relative to the sale price and taking the median.

In the U.S., the Pacific Coast region, particularly California, has the most expensive properties, making down payments here especially notable.

Hannah Jones explained, "In areas with high home prices and fierce competition among buyers, down payments are typically higher."

For example, in Oxnard, California, homebuyers pay the highest down payment among the top 150 cities, averaging 24.5% of the median home purchase price, which is about $168,683.

However, the city where buyers pay the highest down payment is San Jose, California. Here, buyers pay an average of $213,000, accounting for 24.0% of the purchase price. According to Realtor.com's analysis, San Jose, located in Silicon Valley, is one of the most expensive real estate markets in the U.S. The median home price here is about $1.46 million, meaning buyers need at least $361,000 in income to purchase a home.

realtor.com

Interestingly, San Jose is also among the cities with the largest annual decline in down payments. Compared to the fourth quarter of 2023, the down payment amount here dropped by 11.9%, highlighting the overall trend of decreasing down payments.

Two other California cities—Santa Barbara and San Francisco—also ranked among the top three for highest down payments. In Santa Barbara, the average down payment is $206,033, while in San Francisco, the median down payment is about $201,617.

Jones added, "Because home prices remain high and mortgage rates are rising, many of today's buyers are either high-income earners or leveraging existing home equity (close to the recent peak) to purchase a new home, meaning they have more cash available for down payments."

For lower-income homebuyers, Texas and Florida are good options.

Jones explained, "The real estate markets in Texas and Florida are relatively soft, meaning stagnant home price growth, less competition, and more choices for buyers." This market condition is particularly evident in down payment trends.

In Texas, homebuyers need to pay an average down payment of $15,105, while in Florida, buyers need about $27,809 to purchase a median-priced home.

The decline in down payments in these states is related to the pandemic. During that time, housing demand in these mild-climate states surged, leading to tight housing supply and rising prices. Now, with the pandemic's impact waning, the housing market has slowed under the pressure of high mortgage rates, and housing inventory has increased.

In fact, among the 150 largest metropolitan areas in the U.S., Texas and Florida account for 23, with 14 markets seeing a decrease in down payment percentages.

The city with the largest decline in down payments is Palm Bay, Florida. In the first quarter of 2023, buyers here paid about $29,000, or 15% of the purchase price. In the first quarter of 2024, this figure dropped to $17,000, or 12.9%.

Additionally, Ocala and Naples in Florida are also among the cities with significant down payment decreases. In Ocala, the average down payment is $8,259, a decrease of 51.3%, while in Naples, the down payment is $67,895, a decrease of 14.5%.

Jones pointed out, "Homebuyers hoping to purchase in areas where down payments have decreased may see more affordable listings or face less competition."

Despite the decrease in down payments in 2024, this doesn't mean that homebuyers with extra cash should lower their down payment.

Since the pandemic, mortgage rates have significantly increased. Therefore, many homebuyers opt to pay a larger down payment to reduce the loan amount and thus lower interest expenses.

"This doesn't mean you have to pay a larger down payment," Jones said. "But you might find it beneficial because it can immediately increase home equity, minimize interest expenses, and favor your success in multiple bids."