Housing Data: Record Cash Buyers Among First-Time Homeowners

First-time homebuyers who purchased a property in cash represented a record 10% of all such transactions, according to data released by the National Association of Realtors. This marks the highest share of all-cash first-time buyers since the group began collecting the metric in 2003. The trend stands in contrast to the overall participation rate, which remains at a near-record low of 22%.

Jessica Lautz, the deputy chief economist at the association, attributed the shift to generational wealth transfers. She noted that inheritances are a primary driver for this segment. Among first-time buyers who paid in full, 28% used an inheritance as a funding source, and 21% used proceeds from selling an inherited property. These figures are higher than the rates for buyers who financed their purchases.

The age gap between these two groups is substantial. The median age for all first-time buyers is 40, which is also a record high. However, the median age for those who paid cash is 54, compared to 38 for buyers who took out a mortgage. Lautz explained that these older buyers often waited for a transfer of wealth to occur before entering the market.

Funding sources for down payments have also shifted. Personal savings remain the largest source for first-time buyers overall. However, more buyers are now using assets such as 401(k)s, stocks, or cryptocurrency than those receiving financial help from family or friends. Lautz suggested that older buyers feel more comfortable using their own accumulated assets rather than asking parents for a gift or loan.

Real estate agents report seeing more all-cash offers in competitive markets. Jason Miller, a broker in St. Cloud, Minnesota, said he saw almost no first-time buyers paying cash in the first 15 years of his career. Since the pandemic, he has encountered many such clients who want to present the strongest possible offer. Miller noted that high mortgage rates make financing expensive over a 30-year period, pushing some buyers toward cash deals.

Nate Johnson, a broker associate in St. Louis, observed that some buyers borrow cash from relatives to make a competitive offer, then refinance after closing to repay the loan. Johnson said it is not uncommon for multiple cash offers to appear on the table for a single property. This dynamic intensifies competition for buyers who must rely on traditional financing.

The report indicates a growing divide in the housing market. One group consists of buyers who are saving independently but are priced out of the market. The other group waits for a generational transfer of wealth, such as an inheritance, before purchasing. Seth Daphne Esmeson, a 33-year-old resident of Seattle, said the current market makes homeownership seem unrealistic for their household due to existing debt and high prices. Esmeson stated that receiving an inheritance is likely the only way they would buy, though they prefer not to plan around that possibility.