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KEY TAKEAWAYS
- Down payments on homes surprisingly fell in the third quarter, with the median down payment totaling $30,300, according to Realtor.com.
- With more homeowners listing their houses and homebuyers ready to purchase, down payment amounts defied historical trends and edged down from the last quarter.
- Experts say this trend doesn’t quite reflect lower rates and may not last long if rates fall further and competition for homes increases.
- Mortgage rates fell in anticipation of the Federal Reserve’s September rate cut. Although they have risen since the cut, rates are still the lowest all year.
Down payments on homes surprisingly fell in the third quarter, even as home buyers flocked to the housing market to take advantage of lower mortgage rates.
Typically, down payment amounts are highest in the third quarter, but this year, the second quarter edged out the third, according to a recent report by Realtor.com. The median down payment amount fell to $30,300 in the third quarter compared to $32,700 in the second quarter. Although amounts have fallen slightly, the typical down payment dollar amount is still more than double the pre-pandemic median.
Down payments can indicate how much homes are selling for, as most home buyers put down 20% of the price when buying a house. Down payments can be a stumbling block for first-time home buyers, who often put down less.
This trend doesn’t quite account for the lower mortgage rates and may not last long, according to Hannah Jones, senior economic research analyst for Realtor.com.
“It is too early to tell if this is the beginning of a lasting downward trend in down payments,” Jones said. “Easing mortgage rates may bring more buyers back into the market, potentially increasing competition—and down payments—once again if for–sale inventory fails to keep pace with demand.”
Slight Dip In Rates Recharged The Housing Market
In September, mortgage rates dropped to their lowest level in two years as the housing market prepared for the Federal Reserve’s first interest rate cut since they dropped rates to near zero in 2021.
Homebuyers raced to the housing market to take advantage of low interest rates then, locking in nearly 70% more mortgages on Sept. 23 than a month earlier, according to data from Optimal Blue and analyzed by Redfin.
Before the Fed rate cut, the housing market was locked in a standstill, as homeowners were reluctant to trade the ultra-low mortgage rates they had received during the pandemic for the high mortgage rates available.
But they felt more confident about the housing market after the Fed move, and more homeowners listed their homes in September than in any month over the past three years.
With more houses on the market to meet the demand, experts hoped it would decrease competition and, in turn, housing costs.
While mortgage rates are still at their lowest levels all year, in the weeks following the rate cut, mortgage rates started to creep back up, according to data by Freddie Mac.