A new study by RealtyTrac found that in 25 counties with the highest median home sales prices at the end of 2014, the average down payment percentage was 24 percent for homes purchased, nearly twice as high as the national average of 14 percent.

The average down payment in dollars in the pricier 25 counties was $138,547 compared to a national average of $32,141 in the total 386 counties measured.

The down payment differential suggests that wealthier buyers who can afford larger down payments—often move up buyers with equity from their sales—are able to secure financing easier by reducing their loan to value ratios and lower their overall mortgage obligations and the amount of interest they will pay over the life of the loan.   Buyers in lower cost markets are more likely to be first-timers using FHA or one of the new GSE 3 percent down programs.

Average Down Payment Remarkably Stable

Despite the dramatic changes in real estate markets in recent years, including the decline of FHA market share, rising prices, fewer first-time buyers, the tax credits in 2010 and the enactment of the QM rule last year, down payment rates have remained remarkably steady during the recovery period.

Five years ago LendingTree reported that the average mortgage down payment nationwide was 12.29 percent from November 2010 – November 2011.  In 2012 NAR’s Survey of Home Buyers and Sellers found that the median down payment for all home buyers was 9 percent, ranging from 4 percent for first-time buyers to 13 percent for repeat buyers. At that time 46 percent of first-time buyers financed with a low-down payment FHA mortgage, and 10 percent used the VA loan program with no down payment requirements.

In NAR’s most recent Profile of Home Buyers and Sellers released last November, the average down payment ranged from 6 percent for first-time buyers to 13 percent for repeat buyers, about same as the RealtyTrac findings.  A leading cause for the first-timer increase was the market share FHA has lost due to its soaring mortgage insurance premium costs. Nearly 80 percent of FHA loans provide financing for first-time homebuyers and 47 percent finance minority homebuyers.  A recent HUD report shows the number of FHA loans made to first-time homebuyers has declined 44 percent since 2010 and it is 30 percent below the level in 2000.  The recent halving of FHA’s annual mortgage insurance premium announced earlier this year by President Obama is expected to stem the flight from FHA.

“This analysis shows that first time homebuyers have a better shot at buying a home in low-priced markets, not just because of the lower price point but because on average buyers are putting down just 12 percent in those markets compared to 24 percent in high-priced markets,” said Daren Blomquist, vice president at RealtyTrac. “Meanwhile, the markets where millennials are moving the most have above-average down payment percentages, which will make it tough for millennial renters to convert into first-time homebuyers in those markets.

“There are a few exceptions, however, where the combination of an influx of millennials and relatively low average down payment percentages indicate markets that will see a quicker return of the first-time homebuyer,” Blomquist added. “Markets such as Nashville, Durham, Philadelphia, Des Moines, Little Rock and Columbus, Ohio.”

Down payments average 24 percent in highest-priced markets

In the 25 counties with the highest median home sales prices at the end of 2014, the average down payment percentage was 24 percent for homes purchased in 2014. The average down payment in dollars in these 25 counties was $138,547. On average, low down payment loans accounted for 7 percent of all home purchases in these counties in 2014.

 

5 Highest Down Payment Averages among Highest-Priced Markets

State	County	MSA	December 2014 Median Home Price	Avg Down Payment Pct	Avg Down Payment Dollars
New York	New York	New York-Northern New Jersey-Long Island, NY-NJ-PA	$935,000	37.18%	$347,614
California	San Francisco	San Francisco-Oakland-Fremont, CA	$1,018,000	30.01%	$305,467
California	San Mateo	San Francisco-Oakland-Fremont, CA	$825,000	28.46%	$234,779
New York	Kings	New York-Northern New Jersey-Long Island, NY-NJ-PA	$580,000	28.20%	$163,537
California	Marin	San Francisco-Oakland-Fremont, CA	$864,500	27.81%	$240,432

 

Down payments average 12 percent in lowest-priced markets

In the 25 counties with the lowest median home sales prices at the end of 2014, the average down payment percentage was 12 percent for homes purchased in 2014. The average down payment in dollars in these 25 counties was $8,239. On average, low down payment loans accounted for 25 percent of all home purchases in these counties in 2014.

5 Lowest Down Payment Averages among Lowest-Priced Markets

State	County	MSA	December 2014 Median Home Price	Avg Down Payment Pct	Avg Down Payment Dollars
Michigan	Genesee	Flint, MI	$70,000	8.98%	$6,283
Michigan	Muskegon	Muskegon-Norton Shores, MI	$75,039	9.53%	$7,155
Ohio	Clark	Springfield, OH	$74,400	9.56%	$7,110
Ohio	Ashtabula	Ashtabula, OH	$72,500	9.68%	$7,019
Georgia	Bibb	Macon, GA	$45,000	9.92%	$4,462

 

Average down payment 17 percent where millennials are moving most

In the 25 counties with the biggest increase in the millennial population between 2007 and 2013, the average down payment percentage was 17 percent for homes purchased in 2014 (above the national average of 14 percent). The average down payment in dollars in these 25 counties was $66,174 – more than twice the national average of $31,723. The average down payment percentage in these 25 counties was 17 percent (above the national average of 14 percent), and on average low down payment loans accounted for 15 percent of all home purchases in 2014 (compared to 18 percent on average among all counties analyzed).

5 Highest Average Down Payments among Millennial Magnet Markets

State	County	MSA	Avg Down Payment Pct	Avg Down Payment Dollars	% Change Millennials 2007 to 2013
New York	New York	New York-Northern New Jersey-Long Island, NY-NJ-PA	37.18%	$347,614	42.79%
California	San Francisco	San Francisco-Oakland-Fremont, CA	30.01%	$305,467	68.04%
New Jersey	Hudson	New York-Northern New Jersey-Long Island, NY-NJ-PA	21.83%	$75,312	44.30%
Massachusetts	Suffolk	Boston-Cambridge-Quincy, MA-NH	21.42%	$90,811	28.54%
Virginia	Arlington	Washington-Arlington-Alexandria, DC-VA-MD-WV	21.28%	$114,688	82.24%

5 Lowest Average Down Payments among Millennial Magnet Markets

State	County	MSA	Avg Down Payment Pct	Avg Down Payment Dollars	% Change Millennials 2007 to   2013
North Carolina	Cumberland	Fayetteville, NC	9.31%	$8,287	20.77%
Tennessee	Montgomery	Clarksville, TN-KY	10.57%	$14,144	46.34%
Virginia	PRINCE WILLIAM	Washington-Arlington-Alexandria, DC-VA-MD-WV	11.15%	$32,891	22.23%
Arkansas	Pulaski	Little Rock-North Little Rock-Conway, AR	12.18%	$15,472	20.57%
Iowa	Polk	Des Moines-West Des Moines, IA	12.46%	$16,194	23.45%

 

Top 10 markets for first time homebuyers

RealtyTrac identified the top 10 markets for first time homebuyers based on the average down payment percentage being below the national average of 14 percent and an increase in the millennial population of 20 percent or more following the Great Recession.

State	County	MSA	Avg Down Payment Pct	Avg Down Payment Dollars	% Change Millennials 2007 to 2013
Tennessee	Montgomery	Clarksville, TN-KY	10.57%	$14,144	46.34%
Tennessee	Davidson	Nashville-Davidson-Murfreesboro-Franklin, TN	13.40%	$21,104	37.12%
North Carolina	Durham	Durham, NC	13.07%	$20,326	27.58%
Pennsylvania	Philadelphia	Philadelphia-Camden-Wilmington, PA-NJ-DE-MD	13.40%	$12,054	24.90%
Iowa	Polk	Des Moines-West Des Moines, IA	12.46%	$16,194	23.45%
Virginia	PRINCE WILLIAM	Washington-Arlington-Alexandria, DC-VA-MD-WV	11.15%	$32,891	22.23%
Ohio	Franklin	Columbus, OH	12.92%	$16,536	21.86%
North Carolina	Cumberland	Fayetteville, NC	9.31%	$8,287	20.77%
Arkansas	Pulaski	Little Rock-North Little Rock-Conway, AR	12.18%	$15,472	20.57%
Georgia	Columbia	Augusta-Richmond County, GA-SC	12.14%	$17,478	20.34%