CHM Blog

The down payment math no one is talking about

Down payments just did something unusual: they grew in dollar terms nationally while shrinking almost everywhere buyers actually feel the squeeze most. Hannah Jones' analysis for Realtor.com untangles what's really going on beneath that number.

The typical down payment rose to 13.7% of a home's price in the second quarter, up nearly a full percentage point from Q1's 12.9%, though still down from 14.3% a year earlier. In dollar terms, the median down payment fell 9.2% year over year to $27,100. That rebound carried into summer, with July hitting an annual high of $28,800, or 14.0%, though both figures remained below where they sat a year ago.

The driver behind the jump traces back to mortgage rates. Rates began climbing in March and kept rising through spring and summer as the conflict in Iran fed inflation concerns. As borrowing costs increased, more marginal buyers stepped back entirely, leaving the market skewed toward buyers who could handle higher rates, often by leaning on a larger down payment. That's consistent with what Realtor.com's August housing report found more broadly: active listings up year over year for a 32nd straight month, list prices down for a 10th consecutive month, conditions that generally reduce pressure to lead with an oversized down payment.

Down payments only tell part of the affordability story, though. The rate applied to whatever's left of the loan matters just as much, arguably more. The typical buyer's estimated monthly payment is up 3.5%, or $80, from a year ago, and a striking 74.2%, or $1,012, since 2021. Jones breaks down where that increase actually comes from: if 2026's rates had instead stayed at 2021's 2.88%, the payment increase from a larger loan alone would only be about 11.4%. The other roughly 60% of the jump comes from the mortgage rate itself, which has more than doubled since 2021.

Down payments have absorbed some of that shock, but only modestly. Nationally, the median down payment share is up just 1.4 percentage points since 2021, translating to roughly $39 a month in extra cushion for a typical buyer. National numbers, however, hide within local ones. In Hartford, Boston, New York, and Seattle, down payment shares climbed 4 to 9 percentage points over five years, saving buyers there $200 to $270 a month compared to if they'd kept 2021-era habits. In softer markets like Austin, San Antonio, Houston, Phoenix, Tucson, and Dallas, down payment shares actually fell 1.6 to 2.8 percentage points, adding an extra $35 to $85 a month in costs.

Despite recent cooling, down payments remain well above pre-pandemic norms. Back in 2019, the typical down payment was $14,000, or 11.2%. Since then, the dollar amount has climbed 93.6%, nearly doubling, while asking prices rose 34.4% and existing home sale prices rose 53.5% over the same stretch. Part of the explanation lies in who is actually buying. NAR's latest annual data shows the first-time homebuyer share fell to 21% in 2026, the lowest on record dating back to 1981, meaning more of today's buyers are repeat purchasers drawing on substantial existing home equity.

Jones points to mortgage rates as the real variable that will determine what happens next. Rates have now pushed above year-ago levels for the first time this year, reversing what had briefly looked like a more affordable spring. If rates keep climbing, both down payments and monthly payments are likely to stay elevated as marginal buyers continue sitting out.

A genuine rate reprieve, more than any further shift in down payment behavior, would do the most to unlock real affordability from here.

Realtor, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Higher

Mortgage rates are moving higher today. The MBS market worsened by -80 bps last week. This was enough to increase mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Higher

These are the three things that have the greatest ability to impact rates this week. 1) Inflation, 2) Jobs and 3) Oil.

1) Inflation: We get the Fed's preferred measure of Inflation, PCE on Wednesday. Both the headline and Core (ex food and energy) are expected to grow at a faster pace than the prior month. Bond yields are extremely sensitive to this release. We also get Prices Paid out of Friday's ISM Manufacturing report.

2) Jobs: We get a ton of job and wage related data all week long that culminates in Big Jobs Friday. The last NFP report really pressured markets as it was hotter than expected. The revisions to last month and the prior month will get a lot of weight as will the Average Hourly Earnings.

3) Oil: Oil prices (as well as diesel) will continue to get a lot of attention by all the markets. Higher oil for longer has been a real factor in rates.

This Week's Potential Volatility: High

This morning markets have started under heavy pressure. Volatility has started high and is likely to stay that way all week.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

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