LOS ANGELES – Even with mortgage rates hovering near all-time lows, rising home prices are putting more pressure on buyers to come up with a bigger down payment.
In the April-June quarter, the median down payment on a single-family U.S. home was $13,955, a 15.3% increase from a year earlier, according to industry tracker Attom Data Solutions. In the first three months of 2020, it vaulted 29% from the same period in 2019.
The trend follows a steady climb in U.S. home prices this year. As of August, they were up 5.2% from a year earlier.
The rise in home prices is stretching the limits of affordability for many Americans already struggling to save for a down payment.
“Home values are increasing approximately twice as fast as typical incomes,” said Chris Glynn, senior economist at Zillow. “There’s this divergence between home values and the salaries and incomes that buyers have to keep up with that.”
That divergence shows no signs of easing, given the combination of extremely low inventory of homes on the market and fierce competition as more millennials look to transition from renting to owning.
Demand for homes has been strong this year, despite a brief slowdown in the early days of the pandemic. Sales of previously occupied U.S. homes surged 9.4% in September to a seasonally adjusted annual rate of 6.54 million, according to the National Association of Realtors.
That sales pace was the highest since February 2006, the peak of the last housing bubble, and left just 2.7 months of available homes on the market, a record low.