The U.S. housing market is showing new signs of strain, with typical down payments shrinking for the first time in nearly two years. Redfin reports the median down payment now stands at $62,468, a 1% drop from a year ago. This trend is unfolding even as home prices edge upward, suggesting a broader shift in the market.

Down payments drop amid affordability pressure

Homebuyers today are putting down 15% on average, holding steady in percentage terms but falling in dollar amounts. This decline reflects a mix of rising home prices , increased use of government-backed loans, and more buyers opting for cheaper homes. Nearly one-third of home purchases are now made in all cash, skewing the numbers.

FHA and VA loan usage grows

More buyers are leaning on lower-down-payment options like FHA and VA loans. FHA-backed sales now represent 15.3% of mortgaged purchases, up from 14.2% last year. VA loans have also gained traction, especially in military-heavy metros like Virginia Beach and Jacksonville.

Market conditions tip toward buyers

Inventory is rising, competition is easing, and sellers are more willing to negotiate. Zillow reports a nearly 20% increase in available homes compared to last year. While sales are still sluggish by historical standards, buyers are seeing more options and longer timelines.

Buying vs. renting: The affordability gap narrows

For many families, renting has become the more affordable option. The average mortgage payment with a 10% down payment now exceeds rent by just $92 per month nationally. Six years ago, buying was significantly cheaper than renting. That reversal highlights the long-term affordability crunch buyers face.

Regional data shows wide disparities

In high-cost metros like San Francisco and San Jose, down payments exceed $400,000, while in Virginia Beach they dip as low as $7,200. Similarly, all-cash transactions dominate in Cleveland and West Palm Beach but are rare in tech-driven markets like Seattle and San Jose.

What it means for the housing crisis

The simultaneous rise in home prices, mortgage rates, and buyer caution paints a complicated picture. First-time buyers are under pressure, and lenders are adapting with more flexible products. Still, the long-term question remains: Will affordability improve, or is this the new normal?

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