NAR: Record Share of First-Time Buyers Pay All Cash

The path to homeownership has shifted for many Americans, with a record 10% of first-time buyers now paying entirely in cash. According to a new report from the National Association of Realtors, released on Wednesday, this trend coincides with the share of first-time buyers remaining at a near-record low of 22% of all home purchases. The data suggests that those entering the market are less likely to be young and more likely to have accumulated wealth or received a financial windfall.

Jessica Lautz, deputy chief economist at the NAR, identified inheritances as the primary engine behind this shift. Buyers who paid with cash were far more likely to rely on an inheritance or the sale of an inherited property than those who took out a mortgage. Specifically, 28% of all-cash first-time buyers cited an inheritance as a funding source, compared to 21% who used proceeds from selling an inherited asset. This financial boost appears to be unlocking buyers who have been waiting for a generational transfer of wealth.

The demographic profile of the average first-time buyer has also aged considerably. The NAR report places the median age of all first-time buyers at 40, a record high. Among those who financed their purchase, the median age was 38. However, for the subset that paid all cash, the median age jumped to 54. Lautz noted that these individuals often waited a long period for family wealth to become available to them.

Funding strategies for down payments are also changing. While personal savings remain the largest source of funds for first-time buyers overall, more people are now using assets such as 401(k)s, stocks, or cryptocurrency. This group is outpacing those who rely on financial help from family or friends. Lautz suggested that older buyers may find it less comfortable to ask parents for gifts or loans at age 40 than they would have in their early 30s.

Real estate professionals across the country are observing this change in bidding behavior. Jason Miller, a broker with Trust Real Estate Company in St. Cloud, Minn., said he saw virtually no first-time buyers paying all cash in the first 15 years of his career. Since the pandemic, however, the frequency has increased. Miller explained that high mortgage rates make financing expensive for a 30-year term, pushing some buyers to use cash to make their offers more competitive.

Not all of this cash comes from deceased relatives. Miller reported seeing more clients who receive help from family members who have paid off their own homes or sell a second property to gift the equity. Miller described this as a form of future inheritance. Nate Johnson, a broker associate with RedKey Realty Leaders in St. Louis, added that some younger buyers are borrowing cash from relatives to make a stronger offer, with plans to refinance later to repay the loan.

For buyers without family wealth, the market remains difficult. Seth Daphne Esmeson, a 32-year-old resident of Seattle, said they and their spouse have good jobs but also carry debt from student loans and car payments. Esmeson believes that current home prices make buying impractical and doubts that home equity will outpace other investments. They plan to continue renting and view the possibility of buying as dependent on receiving an inheritance, a prospect they do not want to actively plan around.

The NAR report notes that the share of first-time buyers using inheritances is likely to grow as baby boomers reach their 80s and beyond. The organization described a growing divide between those who are saving independently but are priced out, and those who are waiting for a generational transfer of wealth. For now, the competitive nature of the market continues to favor those with immediate liquidity.

The report does not provide a specific timeline for when the share of all-cash buyers might decline. It stands as a snapshot of the current market conditions, where high prices and high rates are filtering the pool of eligible buyers.