One in 10 New Buyers Pay Cash

One in 10 first-time homebuyers paid entirely in cash, a record high since data collection began in 2003, according to a new report from the National Association of Realtors. This all-cash segment is growing even as the overall share of first-time buyers hits a near-record low of 22 percent. The group paying cash is distinct from those who finance, with the median age sitting at 54 years old. By comparison, the median age for first-time buyers who used a mortgage is 38, and the median age for all first-time buyers is 40.

Jessica Lautz, deputy chief economist at the NAR, attributes the shift to generational wealth transfers. She noted that inheritances are a primary driver for these buyers. Data from the report shows that 28 percent of all-cash first-time buyers used an inheritance for their purchase. Another 21 percent used proceeds from selling an inherited property. Lautz explained that many of these buyers waited a long time for family assets to become available to them.

Funding sources for down payments are also changing across the board. Personal savings remains the largest source for all first-time buyers. However, more buyers are now using assets such as 401(k)s, stocks, or cryptocurrency than they are receiving financial help from family or friends. Lautz suggested that older buyers have had more time to accumulate these assets. She also observed that people in their 40s may feel less comfortable asking parents for gifts or loans than they did in their early 30s.

Real estate agents report seeing this trend in their local markets. Jason Miller, a broker with Trust Real Estate Company in St. Cloud, Minnesota, said he saw virtually zero first-time buyers paying cash in his first 15 years. Since the pandemic, he has handled numerous such transactions. Miller said buyers often use cash offers to compete in a tight market. He also noted that high mortgage rates make financing expensive, pushing some buyers toward cash deals. Miller sees clients receiving gifts from relatives who have paid off their own homes or are selling second properties to provide equity.

Nate Johnson, a broker associate with RedKey Realty Leaders in St. Louis, described a similar competitive environment. He said it is not uncommon to see five or six offers on a property, with three of those potentially being all-cash. Johnson observed that some younger buyers borrow cash from relatives to make a competitive bid. After closing, these buyers sometimes refinance into a mortgage to repay the family member. Johnson noted that even with a national housing slump, his local market remains intensely competitive.

The rise of cash buyers complicates the market for those who struggle to save for a down payment. Seth Daphne Esmeson, a 32-year-old resident of Seattle, said they and their spouse have good jobs but also carry debt, including student loans and a car payment. Esmeson decided that buying does not make sense at current prices. They are staying in their rental apartment because they like their landlord and are unsure if home equity would outpace other investments. Esmeson described the current market as a bad deal for their generation, noting that the gap between buyers and non-buyers is expanding. They said the only way they might buy is if they received an inheritance, though they did not want to plan around that possibility.

The NAR report predicts the share of first-time buyers using inheritances will grow in coming years. This projection follows the aging of the baby boomer generation, many of whom are reaching their 80s. The report highlights a growing divide between those saving independently but priced out of the market and those waiting on the sidelines for a generational wealth transfer.