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June 2024 » thefivestar.com 79 June 2024 J O U R N A L down payments had weakened slightly, falling to an average 13.3%, still signifi- cantly above pre-pandemic levels but lower than 2022. Despite the reduction in the average annual down payment amount, down payments reached a record high of 14.7% in Q3 of 2023. Similarly, while Q1 of 2024 witnessed fewer down payments than previous quarters, compared to Q1 of 2023—which is a fair correction for seasonality—there was a yearly rise in down payment as a percentage of purchase price as well as in cash amount. In all states except eight, the average down payment grew annually as a percentage of the selling price in Q1 2024. In all but eight states, the average dollar amount for a down payment climbed. In Q1 2024, New Hampshire saw the greatest increase in payment as a proportion of price (3.4 percentage points), rising from 17.5% to 20.9%, followed by Rhode Island (+2.3 percentage points) and Connecticut (+1.8 percentage points). These states, the most of which are in the Northeast, have high prices and are more likely to attract purchasers with high incomes who can compete with a down payment. Mortgage Rates Restrict Both Housing Supply and Housing Demand Mortgage rates declined from multi-de- cade highs reached in Q3 of 2023 but remained in the 6.6% to 7% range through Q1 of the year. As interest rates fell, some buyers and sellers returned to the market, and listing activity increased year after year. Despite six months of yearly inventory ex- pansion, the number of properties for sale in April remained roughly 40% lower than pre-pandemic levels. Despite progress, many sellers remain hesitant to sell, which would re- quire exchanging a low-rate mortgage for a new, higher-rate mortgage. In Q1 of the year, the average outstanding mortgage rate was 3.78%, or about three percentage points lower than the quarter's going rate for mortgage originations. Similarly, in April, 26% of customers expected mort- gage rates to fall this year, prompting some to wait for lower rates. Even if buyer and seller activity remains restricted, many markets, particularly cheap markets, continue to experience buyer competition, which is spurred by limited for-sale home inven- tory. Climbing down payments indicate that purchasers in these locations may be making large down payments to com- pete, to cut the size of their mortgage in the face of rising interest rates, or to take advantage of high cash available follow- ing a home sale in a higher-priced area. Down Payments Shrink in Pandemic Hotspots In Q1 of 2024, down payments de- clined in eight states, including Mon- tana, D.C., Wyoming, Oklahoma, and South Carolina. These states, along with Florida, had a yearly reduction in the size of down payments. Utah and Delaware had the percent down decrease annually but the dollar amount increase, as rising home prices pushed up dollar amounts, but Texas and North Dakota witnessed the opposite, with decreasing home prices dominating. Additionally, during the pandemic, demand surged in Texas and Florida, resulting in low inventories and rising costs. However, since mortgage rates rose in mid-2022, demand for homes in these locations has decreased, resulting in an increase in inventory. Some locations, including Austin (+28.9%), San Antonio (+27.4%), and Denver (+15.2%), as well as four others, saw inventories return to or exceed pre-pandemic levels while national inventory remained low. The easing of the Texas and Florida property markets has resulted in halted home price increases, with purchasers presum- ably facing less competition and more options. This impact can also be seen in down payment trends. Homebuyers seeking to navigate these trends may discover that relatively moderate markets provide the potential to achieve homeownership while limiting interest payments by utilizing their existing resources to place a greater down payment on a home. In all states except eight, the average down payment grew annually as a percentage of the selling price in Q1 2024.