NAR: Inheritances fuel record all-cash purchases among first-time homebuyers

The National Association of Realtors released a report on Wednesday showing that only 22% of homebuyers in the United States are first-time purchasers, a figure near a record low. However, among that shrinking group, one in ten paid entirely in cash, a proportion not seen since the association began tracking the data in 2003.

Jessica Lautz, the deputy chief economist at the NAR, attributed this shift to the transfer of wealth from older generations. "Inheritances are really driving this," she said. The data indicates that first-time buyers who paid in cash were more likely to use an inheritance (28%) or proceeds from selling an inherited property (21%) than those who took out loans.

Age plays a defining role in this trend. The median age for all first-time buyers has reached 40, a historic high. For those who financed their purchase, the median age was 38, while it was 54 for all-cash buyers. Lautz noted that these individuals waited for a generational transfer of wealth to occur before entering the market.

Funding sources have also changed. While personal savings remain the largest source of down payments, more buyers are now using assets such as 401(k)s, stocks, or cryptocurrency rather than asking family or friends for financial help. Lautz suggested that as buyers age, the social dynamic of asking parents for money changes. "I think it's uncomfortable to ask mom and dad for a gift or loan when you're hitting 40 versus your young 30s," she said.

Real estate professionals report seeing this behavior in their daily work. Jason Miller, a broker with Trust Real Estate Company in St. Cloud, Minnesota, said he saw almost no all-cash first-time buyers in his first 15 years of career. Since the pandemic, however, the volume has increased. Miller explained that high mortgage rates make financing expensive, pushing buyers to use cash to present stronger offers in competitive markets.

Miller also observed that some families are gifting equity from paid-off homes or second properties to their children, viewing the transfer as a future inheritance. In St. Louis, Nate Johnson, a broker associate with RedKey Realty Leaders, said many younger buyers are borrowing cash from relatives to make their bids more attractive. Johnson noted that his local market remains intensely competitive, with five to ten offers common on a single property, where three might be all-cash.

After closing, Johnson has seen some of these buyers refinance into a standard mortgage and pay back their family members. For others, the high cost of homeownership remains a barrier. Seth Daphne Esmeson, a 32-year-old resident of Seattle, said they and their spouse have good jobs but also significant debt, including car payments and student loans. They decided that buying at current prices does not make sense, preferring to remain in their current rental. "We have the short end of the deal," Esmeson said, adding that the gap between their financial position and home prices is expanding.

Esmeson said the only way they might eventually buy is through an inheritance, though they do not want to strategize around that possibility. The NAR report notes a growing divide between those saving independently and being priced out, and those waiting on the sidelines for a transfer of wealth.