Despite signs that the housing market is cooling down, one of the most significant hurdles facing many first-time buyers appears to have worsened. As home prices have climbed over the years, new data from LendingTree indicates that down payments have followed a parallel path.
LendingTree’s report found that the average down payment across the 50 largest metros in the U.S. hit $62,611—up 35.3% from September 2021, when LendingTree last published the study. Just last year, the average down payment nationwide was just over $46,000.
Analyzing data from more than 960,000 of its platform users who lived in one of the nation’s 50 largest metros and were offered a 30-year fixed-rate mortgage from January 1, 2022 to October 10, 2022, the report deduced that the average down payment on a home equates to 58.3% of that area’s average yearly household income.
California markets topped the list of major metro areas with the highest average down payments, accounting for five of the top 10 cities named in the report—San Jose, San Francisco, Los Angeles, San Diego and Sacramento.
Down payments were the lowest in Oklahoma City, St. Louis and Virginia Beach.
The highlights:
- A down payment on a home across the nation’s 50 largest metros averages $62,611.
- Across the nation’s 50 largest metros, the average down payment on a home equates to 58.3% of that area’s average yearly household income.
- California is home to the three metros where down payments are highest— San Jose, San Francisco and Los Angeles.
- Oklahoma City, St. Louis and Virginia Beach, Virginia, are the metros with the lowest down payments.
Key takeaway:
“With home prices showing signs of finally coming down, down payments could also start to fall over the coming months,” said Jacob Channel, LendingTree’s senior economist. “With that said, down payments aren’t going to go away for most people, and buyers should still do their best to save as much as they can for a down payment before they set out to buy a home. Remember, the more you save, the easier it often is to get approved for a loan.”
Doubling as the author of the report, Channel states in the study, “Higher down payments can severely impact would-be homebuyers depending on their situations.
“For example, those who already own a home may need to plan to stay longer than they’d like while they save enough cash for a down payment. Or, if they sell their current house and make a profit, they might have to allocate more of that profit toward the down payment on a new home than in the past. Similarly, those who don’t own may need to rent for longer periods or resort to moving in with family to save more money.”
“High down payments aren’t necessarily bad news for those with ample cash on hand. The more money a person can put down on a home, the more likely they will get approved for a mortgage and be offered a lower interest rate. As a result, a high down payment can provide more benefits than drawbacks in many instances for those who can afford it.”
