House hunters in the spring 2024 buying season should brace for increased down payments, which reached a record average of 14.4% by the end of 2023. The typical amount stood at $30,250, despite certain decreases from peak levels. These rising costs are driven by factors such as higher mortgage rates and increased home prices, favoring financially stable buyers while limiting access for lower-income individuals. Interestingly, down payments for investment properties have decreased, diverging from the trend seen in primary residences, indicating changes in market behavior for different buyer segments.
"Higher mortgage rates and higher home prices influence this trend as more financially prepared, high-earning buyers claim homes while entry-level and lower-earning buyers continue to sit out."
"Additionally, high mortgage rates incentivize buyers to put down more as a down payment as a means of limiting loan size and thereby interest payments."
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