Down payments are plunging in the US housing market.

I should probably refrain from weighing in on this particular aspect of home-buying because as one mortgage banker acquaintance not-so-patiently explained to me last year when I pushed back on her description of industry practices aimed at promoting equal opportunity homeownership, “My job isn’t to keep single mothers out of homes.”

She was referring specifically to my contention that banks should require considerably more in the way of a financial buffer to cover mortgage payments in the event of a lost job (and by “considerably more” all I meant was more than two months, which is what she suggested the standard is), but she wasn’t especially enamored with my views on down payments either.

I’m a staunch advocate for equality of opportunity, as any longtime reader will readily attest, but it simply isn’t a good idea for the average American family to leverage themselves 10 times on an asset the median price for which is almost $400,000.

I readily acknowledge that housing is a “special” situation and that these arrangements work out ok almost all of the time for Americans. As a result, homeownership has become the key pillar of wealth accumulation for regular people. Which is great. My contention isn’t that it doesn’t work.

Instead, my argument is that in a vacuum, it’s a bad idea, because unless financing costs are extraordinarily low, the viability of such arrangements rests almost entirely on the assumption that the asset in question will appreciate over time, and substantially so. Fortunately for everybody, home prices have always gone up, with a few (very) notable exceptions.

You can mitigate the risk by not leveraging yourself so damn much (if readers will forgive my temporary lapse into colloquialisms), but that means you need to have hundreds of thousands of dollars in spare cash for a down payment, which most people don’t have.

All of that as a roundabout way of reporting that a typical US homebuyer put just $42,000 down in January, according to Redfin data released on Wednesday.

That was the least in two years, but in a testament to how expensive homes still are (even as prices continue to recede from last year’s nosebleed peaks), it still counted as large by pre-pandemic standards, or at least in nominal terms. Specifically, it was 30% above pre-COVID levels.

Redfin cited three main factors for falling down payments: Less prevalent bidding wars (so, you don’t need to “prove” something about your capacity to come through on the financing by waving around a big down payment), the drop in median prices from the highs and, of course, higher rates and inflation.

“Buyers don’t have as much money to allocate to a down payment because their monthly housing payments are higher than before [and they] may be inclined to hold onto as much cash as possible in these uncertain economic times,” as Redfin put it.

Even as down payments dropped, the share of all-cash purchases hit a nine-year high in January, the same report said. Simply put: With mortgage rates at 6%, somebody who can pay cash will pay cash, and not because they’re trying to avoid a bidding war. Rather, because they’re trying to avoid an “expensive” (by the standards of the last 15 years) mortgage.

Coming full circle, the median down payment in January (i.e., that $42,000) amounted to just 10% of the purchase price. That’s in line with levels seen during the half-decade leading up to COVID, but well below the 15%-20% buyers were putting down from 2011 to 2015, and also below the larger down payments made during the height of the COVID boom, when would-be buyers preened in an effort to overcome stiff competition.

Ultimately — and while readily acknowledging that my experience and thought process isn’t typical — I continue to cast a wary eye at a market that’s built on 10x leverage and the assumption of never-ending price increases. If that were anything other than housing, it’d be a good candidate for a “big short.”

But, at the end of the day, property (the land, at least) does have built-in, downside protection. “They ain’t making any more of the stuff,” as the old saying goes.