To afford a monthly mortgage payment, middle-class Americans need to put more than $127,000 down

SEATTLE, June 20, 2024

• A median-income household would need to put 35.4% down to afford the payments on a typical U.S. home.
• Five years ago, the typical U.S. home would have been affordable to a median-income household with no money down.
• A typical home is affordable to a median-income household with 20% down or less in 10 of the 50 biggest U.S. markets.

SEATTLE, June 20, 2024 /PRNewswire/ -- To comfortably afford a typical U.S. home, a home buyer making the median income needs to put down nearly $127,750, or 35.4%, a new Zillow® analysis shows. Five years ago, when mortgage rates were hovering just above 4% and the typical home was worth about 50% less, that home would have been affordable with no money down.

That $127,750 down payment is what a household making the median income would need to put down when purchasing a typical U.S. home — valued at about $360,000 — so that the monthly mortgage payments take up no more than 30% of that household's monthly income.¹

The enormous gap between the down payment needed now and five years ago underscores how the pandemic fueled a scorching-hot housing market, and why the rise in mortgage rates in the time since has cooled the market. Stubbornly high mortgage rates have pushed both buyers and sellers to the sidelines. With so few homes for sale, competition is stiff among the remaining buyers.

"Down payments have always been important, but even more so today. With so few available, buyers may have to wait even longer for the right home to hit the market, especially now that buyers can afford less. Mortgage rate movements during that time could make the difference between affording that home and not," said Skylar Olsen, chief economist at Zillow. "Saving enough is a tall task without outside help — a gift from family or perhaps a stock windfall. To make the finances work, some folks are making a big move across the country, co-buying or buying a home with an extra room to rent out. Down payment assistance is another great resource that is too often overlooked."

To save up $127,750, it would take a household making the median income about 12 years (assuming its members save 10% of their income each month with a 4% annual return). It's no wonder then that 43% of last year's buyers used a gift from family or friends for at least part of their down payment, the highest share since at least 2018.