There’s a common misconception that, as a homebuyer, you need to come up with 20% of the total sale price for your down payment. In fact, a recent survey by Lending Tree asks what is keeping consumers from purchasing a home. For over half of those surveyed, the ability to afford a down payment is the biggest hurdle.

That may be because those individuals assume a 20% down payment is necessary. While putting more money down if you’re able can benefit buyers, putting 20% down is not mandatory. As Freddie Mac puts it:

“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”

If saving that much money sounds overwhelming, you might be ready to give up on the dream of homeownership before you even begin – but you don’t have to. According to the Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. It may sound surprising, but today’s average down payment is only 12%. That number is even lower for first-time homebuyers, whose average down payment is only 7%.

Based on the Home Buyers and Sellers Generational Trends Report from NAR, the graph below shows an even closer look at the down payment percentage various age groups pay:As the graph shows, the only groups who put 20% or more down on average are older homebuyers who likely can use the sale of an existing home to fuel a larger down payment on their next home.

What does this mean for you?

If you’re a prospective homebuyer, it’s important to know you don’t have to put the full 20% down. And while saving for any down payment amount may feel like a challenge, keep in mind there are programs for qualified buyers that allow them to purchase a home with a down payment as low as 3.5%. There are also options like VA loans and USDA loans with no down payment requirements for qualified applicants.

To understand your options, you do need to do your homework. If you’re interested in learning more about down payment assistance programs, information is available through sites like downpaymentresource.com. Be sure to also work with a real estate advisor from the start to learn what you may qualify for in the homebuying process.

Bottom Line

Don’t let the myth of the 20% down payment halt your homebuying process before it begins. If you want to purchase a home this year, let’s connect to start the conversation and explore your options.

Some Highlights

• Whether you’re buying or selling – today’s housing market has plenty of good news to go around.
• Buyers can take advantage of today’s mortgage rates to escape rising rents and keep monthly payments affordable. Sellers can reap the benefits of multiple offers and a fast sale.
• If this sounds like good news to you, let’s connect today so you can capitalize on the unique opportunity you have in today’s market.

There are many headlines out there that claim we’re reverting to a more normal real estate market. That would indicate the housing market is returning to the pre-pandemic numbers we saw from 2015-2019. But that’s not happening. The market is still extremely vibrant as demand is still strong even while housing supply is slowly returning.

Here’s the definition of normal from the Merriam-Webster Dictionary:

“conforming to a type, standard, or regular pattern: characterized by that which is considered usual, typical, or routine.”

Using this definition, here are five housing industry metrics that prove we’re nowhere near normal.

1. Mortgage Rates

If we look at the 30-year mortgage rate chronicled by Freddie Mac, we can see the average rates by decade:

• 1970s: 8.86%
• 1980s: 12.7%
• 1990s: 8.12%
• 2000s: 6.29%
• 2010s: 4.09%

Today, the average mortgage rate stands at 2.87%, which is very close to the historic low.

Currently, mortgage rates are anything but usual, typical, or routine.

2. Home Price Appreciation

According to Black Knight, a housing data and analytics company, the average annual appreciation on residential real estate prices since 1995 has been 4.14%.

According to the latest forecast from the National Association of Realtors (NAR), home price appreciation will hit 14.1% this year, which will be greater than any year since Black Knight began collecting this data.

Currently, home price appreciation is anything but usual, typical, or routine.

3. Months’ Supply of Inventory (Homes for Sale)

According to NAR:

“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.”

As of the latest Existing Homes Sales Report from NAR, the current months’ supply of inventory stands at 2.6. That’s less than half of a normal supply.

Currently, the supply of homes for sale is anything but usual, typical, or routine.

4. Days It Takes To Sell a Home

The days-on-market metric gives an indication of how hot a market is and how quickly homes are selling. In 2019, prior to the pandemic, the average days on market stood at 35, according to NAR. Today, that number is cut in half and is now at 17 days.

Currently, the days-on-market metric is anything but usual, typical, or routine.

5. Number of Offers per Listing

According to NAR, the number of offers per listing stood at 2.2 in 2019. Today, that number is double at 4.5.

Currently, the number of offers per listing is anything but usual, typical, or routine.

Bottom Line

When…

1. Mortgage rates are near historic lows
2. Price appreciation is at historic highs
3. Housing inventory is less than half of the normal amount
4. The time it takes to sell a home is cut in half, and
5. There are twice as many offers on each house

…it’s hard to say we’re in a normal market.