Homebuyers made larger down payments as mortgage rates surged in Q3: Realtor.com

Key Takeaways:

– Homebuyers are increasing their down payments to offset higher borrowing costs due to rising mortgage rates.
– The average down payment for a primary home in Q3 was 14.7%, up from 13.6% the previous year.
– The median down payment in Q3 was $30,000, up from $27,300 the previous year.
– The median home sales price grew 25.4% between Q3 2020 and Q3 2023, making the increase in down payment size even more significant.
– Down payments for vacation/second homes and investment properties were higher than for primary residences.
– Down payments increased in all states except for Idaho, Arizona, Texas, and Utah.
– Washington, D.C., Montana, Connecticut, and Rhode Island saw the highest gains in down payment amounts.
– Northeast markets, particularly New York City and Boston, performed well as buyers looked to invest in those areas.
– Affordability challenges are pricing many prospective homebuyers out of the market, leaving those who can afford it to offer larger down payments.
– The current high-rate environment is incentivizing buyers to pay more upfront to lower their overall borrowing costs.
– Down payments are likely to remain elevated as long as housing market competition continues.

HousingWire:

Homebuyers are forking over larger down payments to offset higher borrowing costs thanks to mortgage rates hitting multi-decade highs.

On average, homebuyers put down 14.7% of the home’s purchase price for a primary home in Q3, up from 13.6% one year ago, according to a Realtor.com report. The median down payment was $30,000 in Q3, up from $27,300 the same quarter a year ago.

Meanwhile, the median home sales price grew 25.4% between Q3 2020 and Q3 2023, making the increase in down payment size even more significant. 

Typical down payments for vacation/second homes and investment properties were 28.2% and 28.3%, respectively, in Q3 2023, up from 26.6% and 26.8% the same quarter a year ago. The typical down payment on a second home or investment property was more than double that of a primary residence in the third quarter.

Realtor.com found that the typical down payment as a percentage of a home’s purchase price increased in all states, except for Idaho, Arizona, Texas and Utah. Washington, D.C., Montana, Connecticut and Rhode Island posted the highest gains in down payment amount as a percentage of the purchase price.

Northeast markets also performed well as buyers looked to invest their housing dollars in New York City and Boston. The typical down payment as a dollar amount increased in all states except 11 in the South and West.

Faced with affordability challenges, many prospective homebuyers are being priced out of the housing market. Those who are still competing are in a financially stronger position to offer larger down payments. The current high-rate environment is also incentivizing buyers to pay a larger sum upfront to lower their overall borrowing costs.

 “As long as housing market competition continues, down payments are likely to remain elevated,” Realtor.com Senior Economic Research Analyst Hannah Jones said in the report.

“Shoppers looking to navigate these trends may find that relatively affordable markets offer the opportunity to achieve homeownership and limit interest payments by using their existing savings to put a larger amount down as a down payment on a home.”

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Property Chomp’s Take:

is an essential element in HTML coding that is used to define a division or section within a web page. It plays a crucial role in structuring and organizing the content of a website, allowing developers to separate different parts of the page and apply specific styles or functions to each division.

In the context of the real estate market, the increasing prominence of

is not directly related to the coding aspect, but rather to the rising trend of homebuyers making larger down payments. As mortgage rates reach multi-decade highs, buyers are feeling the financial strain and are resorting to putting down more money upfront to offset the higher borrowing costs.

According to a recent report by Realtor.com, the average down payment for a primary home in Q3 increased from 13.6% to 14.7%, with the median amount rising from $27,300 to $30,000. This upward trend is significant considering that the median home sales price grew by 25.4% between Q3 2020 and Q3 2023.

The trend is even more pronounced for vacation/second homes and investment properties, where the typical down payments reached 28.2% and 28.3%, respectively, in Q3 2023. These figures represent an increase from 26.6% and 26.8% in the same quarter the previous year. Interestingly, the down payment for a second home or investment property was more than double that of a primary residence.

While most states experienced an increase in down payment percentages, a few states like Idaho, Arizona, Texas, and Utah bucked the trend. On the other hand, Washington, D.C., Montana, Connecticut, and Rhode Island saw the highest gains in down payment amount as a percentage of the purchase price. Northeast markets, particularly New York City and Boston, also performed well as buyers sought to invest their housing dollars in these areas.

The surge in down payment sizes can be attributed to two key factors. Firstly, many prospective homebuyers are being priced out of the housing market due to affordability challenges. Those who are still able to compete find themselves in a financially advantageous position to offer larger down payments. Secondly, the current high-rate environment is incentivizing buyers to pay more upfront to reduce their overall borrowing costs.

According to Hannah Jones, Senior Economic Research Analyst at Realtor.com, as long as housing market competition persists, down payments are likely to remain elevated. She suggests that potential buyers navigate these trends by considering relatively affordable markets that offer the opportunity to achieve homeownership and limit interest payments by using existing savings to make larger down payments.

In conclusion, while

has its place in web development, it is noteworthy that the term has gained attention in the real estate industry due to the growing trend of homebuyers making larger down payments. As mortgage rates rise, prospective buyers are adjusting their financial strategies to offset the increased borrowing costs. This shift in down payment behavior reflects the challenges faced by buyers in an increasingly competitive and expensive housing market.

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