Median Down Payments Push Past $60K

According to a new report from Redfin, 34.1% of homes sold were purchased in cash during the month of September 2023—the highest number in a decade—which is up from 29.5% of purchases year-over-year. 

According to Redfin, all-cash purchases are making up a bigger piece of the market for two major reasons: first is affluent Americans who can afford to pay cash are more apt to buy homes in such an expensive housing market, when the income necessary to buy a home is higher than ever before, and secondly, elevated mortgage rates make buying a home in cash and avoiding interest altogether more attractive. 

According to Freddie Mac’s tracker of mortgage rates, the 30-year fixed mortgage rose to 7.2% in September, its highest level in 20 years. That number moved further north in October, nearing 8%, which year-over-year is about 20% higher than it was in 2022. Rates have since come down a bit from their October highs, but they’re still more than double early-pandemic levels. 

The increase of rates stands as a deterrent for homebuyers who are purchasing a home with a mortgage: overall home sales are down 23% year over year in the metros included in this analysis, compared with an 11% decline for all-cash sales. It’s worth noting that high rates can also be a deterrent for buyers who can afford to pay in cash, because they could get better returns on their money by investing it somewhere besides the housing market. That’s especially true when home prices are high and there’s potential for them to come down. 

“High mortgage rates are exacerbating inequality between people who own homes and people who don’t,” said Redfin Senior Economist Sheharyar Bokhari. “Home prices are roughly 40% higher now than before the pandemic homebuying boom, and soaring mortgage rates have made the divide even bigger by adding more to monthly payments.” 

“Affluent Americans are the only ones who can avoid the sting of high mortgage rates; plus, they’re spending less on housing and keeping more money in the bank because they’re avoiding interest payments. Meanwhile, those who are sidelined by high prices and rates not only can’t afford a home now, but they’re not building wealth through homeownership for the future.” 

The last time all-cash purchases were this common was in 2014. At that time, affluent buyers and corporate investors who could afford to pay cash were leading the housing market recovery from the subprime mortgage crisis, while would-be first-time homebuyers were still suffering the effects of the Great Recession. 

The typical U.S. homebuyer’s down payment was equal to 16.1% of the purchase price in September, up from 15% a year earlier and the highest down-payment percentage since June 2022. 

In dollar terms, the median down payment was $60,980. That’s up roughly 15% from a year earlier, the biggest increase since June 2022. 

Click here to see the report in its entirety.