Florida Down Payments Plunge as People Rush to Sell Houses

Cities in Florida saw some of the largest declines in down payments for home purchases at a time when homeowners in the state are highly motivated to sell, according to an analysis by Realtor.com.

The Palm Bay-Melbourne-Titusville area of the state saw the median down payment plunge nearly 41 percent, a drop of nearly $12,000, in the first quarter of 2024 compared to the same time a year ago. Ocala, meanwhile, saw a more than 51 percent fall, amounting to close to $9,000 less in those payments. Naples-Marco Island area saw a 14.5 percent decline in the size of the down payments, a drop of nearly $11,500.

Overall, the state of Florida saw the size of down payments to begin the year drop 3 percent on a yearly basis, Realtor.com’s analysis reveals.

The Context

The housing market in Florida was catapulted by migrants from other parts of the country during the COVID-19 pandemic, escalating competition for homes which in turn pushed up prices.

But since then, borrowing costs for home loans have jumped after the Federal Reserve hiked rates to battle soaring inflation. Mortgage rates are now hovering above 7 percent making borrowing to finance the purchase of a home expensive, which is impacting what people are able to generate in terms of down payments.

This dynamic comes at a time when Florida’s housing markets appear to possess substantial listings where homeowners appear highly motivated to sell, according to an analysis by Newsweek from last month.

Views

High mortgage rates have depressed housing market activity, experts say.

“Since the rise of mortgage rates in mid-2022, demand for homes in these areas dried up, leading to a build up in inventory,” Hannah Jones, a senior economic research analyst, noted in her analysis.

She added: “The softening of the…Florida housing markets mean home price growth stalled and buyers likely faced less competition and more options. This impact can be seen in down payment trends as well.”

What’s Next

Mortgage rates are expected to stay higher for longer as inflation continues to prove stubborn to fall to the Fed’s target of 2 percent. This stickiness is likely to have policymakers keep monetary conditions tight for the foreseeable future.

Realtor.com’s Jones suggested that while on a yearly basis down payments trended down in the first quarter of this year, compared to the third quarter of 2023, they actually rose.

This suggests that “down payments may, in fact, continue to climb and could hit a new peak later in 2024,” Jones said. “With many buyers opting out of the home purchase market altogether, those left are likely better positioned to make a larger down payment, and incentivized to do so by high mortgage rates.”

But while this applies at the national level, regional quirks could shape local markets differently, Jones added.

“As long as housing market competition continues, down payments are likely to remain elevated nationally, but distinct trends may emerge in different markets as local competitiveness varies,” she said. “Shoppers looking to navigate these trends may find that relatively affordable markets offer the opportunity to achieve homeownership and limit interest payments by using their existing savings to put a larger amount down as a down payment on a home.”