Record Share of First-Time Homebuyers Pay Entirely in Cash
The National Association of Realtors reports that one in ten first-time buyers used no financing, a trend driven by inheritances and high mortgage rates.
By Yasmin Nasser ·
One in ten first-time homebuyers paid for their properties entirely in cash, marking a record high for the metric since data collection began in 2003, according to a report released by the National Association of Realtors. This financial shift occurs while the overall share of first-time buyers remains at 22 percent, a level near a historical low. The report attributes the trend to a persistent housing shortage and elevated prices that sideline many potential buyers. Those who successfully purchase homes are now older and wealthier than previous cohorts.
Jessica Lautz, deputy chief economist at the National Association of Realtors, identified inheritances as the primary driver of this all-cash behavior. First-time buyers who paid without financing were significantly more likely to use an inheritance than those who took out mortgages. Specifically, 28 percent of cash buyers used an inheritance, while 21 percent used proceeds from selling an inherited property. The age gap between these groups is substantial. The median age for all first-time buyers stands at 40, a record high. For those who financed their purchases, the median age is 38, whereas it is 54 for those who paid cash.
"They waited a significant period of time for that generational transfer of wealth to come through," Lautz said. The report notes that personal savings remains the largest source of funding for down payments for first-time buyers in general. However, a shift has occurred in how buyers access additional funds. More buyers are now using assets such as 401(k) accounts, stocks, or cryptocurrency rather than receiving financial help from family or friends. Lautz suggested that older buyers have had more time to accumulate these assets. She also noted a psychological factor in this shift.
"I think it is uncomfortable to ask mom and dad for a gift or loan when you are hitting 40 versus your young 30s," Lautz said. The report predicts that the share of buyers using inheritances will grow in coming years as baby boomers reach their 80s and beyond. The document describes a growing divide in the market. On one side are individuals who are saving independently but remain priced out of homeownership. On the other side are those waiting on the sidelines for a generational transfer of wealth.
Real estate agents across the country report observing this change in client behavior. Jason Miller, a broker with Trust Real Estate Company in St. Cloud, Minnesota, stated that he saw virtually zero first-time homebuyers paying all cash during the first 15 years of his career. Since the pandemic, when homebuying surged, he has handled a number of such transactions. Miller said these buyers knew they needed the strongest possible offer to compete in a tight market. High mortgage rates also drive all-cash bids, as they make 30-year financing far more expensive.
Miller added that not all families wait until death to transfer wealth. He sees more clients receiving help from family members who have paid off their own homes or have equity in a second property. These relatives are gifting some or all of that money, which Miller describes as a form of future inheritance. Nate Johnson, a broker associate with RedKey Realty Leaders in St. Louis, said that for some younger buyers, relatives may only be lending cash to make a bid more attractive. Johnson noted that his local market remains intensely competitive despite a national slump.
"They just know that if we are looking at five or six offers on the table, let us call it 10 offers on the table, which is not uncommon, maybe three of those offers will be all cash," Johnson said. After closing on a property, Johnson has seen some buyers refinance into a mortgage to pay back their family member. The rise of all-cash offers makes the market more difficult for those who struggle to save for a down payment in the face of high home prices.
Seth Daphne Esmeson, a resident of Seattle who will soon turn 33, said that they and their spouse have good jobs but also carry debt, including car payments and student loans. Esmeson believes they may never be in a position to buy and feels that purchasing at current prices does not make sense. "Being that debt burdened, and also having to fix things on your home, like, it sounds really terrible," Esmeson said. They are not convinced home equity would outpace other investments and plan to remain in their current rental. Esmeson stated that the only way they might buy a home is if they received an inheritance.
