Down payments dip, cash buyers retreat in shifting market 

With the housing market tilting in buyers' favor in many parts of the country, new data indicates that the way people are paying for homes is also changing.

Down payments are shrinking — and all-cash purchases are also on the decline, according to two new reports from Redfin.

Typical down payment dropped in late 2025: The typical down payment was $64,000 in December, down 1.5% year-over-year. In percentage terms, that's 15.2% of the home's purchase price — down from 16.7% a year earlier, according to one report.

Down payments may be falling because buyers are seeking more affordable homes to counter high prices and economic uncertainty, said Redfin Principal Economist Sheharyar Bokhari. Buyers have this option because they are outnumbered in many markets by homesellers.

"Sellers typically prefer buyers who make large down payments because it signals financial stability, but sellers don't have much say in today's market," Bokhari said in a news release accompanying Redfin's data.

Less desire to offer all cash: Only 29% of buyers made all-cash payments in December — the lowest share for the month of December since 2020, according to another Redfin report released this week. All-cash purchases were most common in Florida and least common in major metros along the West Coast.

While shifting market conditions are contributing to this downward trend, lower mortgage rates also factor in. Though rates remain elevated compared to the lows seen during the Covid-19 pandemic, the current 30-year rate of around 6.1% is significantly lower than a year ago, when rates were around 7%.

Buyers are also facing less competition, meaning there is less incentive to woo sellers with all-cash offers or wave contingencies, Redfin's report noted. But for those who do offer cash, sellers are jumping at the opportunity.

"The leverage buyers have when they pay in cash is unbelievable," said Amanda Peterson, a Redfin Premier agent in Dallas. "It's not uncommon to see a buyer score a home for 10-20% below the appraised value if they offer cash."

Share of FHA loans hits four-year lows: Meanwhile, the share of government-insured loans intended for low-to-moderate-income borrowers also dropped to 14.4% in December, the lowest for the month of December since 2021.

The decline could be due to continuing home price increases, with more potential buyers priced out. With the overall number of buyers down in recent years, those who are left are more likely to be in higher income brackets, and thus turning to more conventional loan options.

"A lot of homebuyers — especially FHA buyers — are getting cold feet when they see the actual monthly payment and the amount of money they need to bring to the table at closing," said John Tomlinson, a Redfin Premier agent in Fort Lauderdale, Florida.

"They may only have a 3.5% down payment, but with prepaid taxes and mortgage insurance, closing costs can be $20,000–$30,000," Tomlinson added. "Rising HOA fees are adding insult to injury."