First-time buyers fall to 22% of sales as 1 in 10 pays all cash

First-time homebuyers made up just 22% of the U.S. housing market — close to a record low — as a shortage of homes and high prices push many would-be owners to the sidelines, according to a new report from the National Association of Realtors. Among those who did buy, one in 10 paid all cash, the largest share since the trade group began collecting that data in 2003.

Older and wealthier buyers

The report found the median age of first-time buyers remains 40, a record high. Buyers who took out a mortgage had a median age of 38, while those paying all cash had a median age of 54. NAR deputy chief economist Jessica Lautz said inheritances are the main force behind the cash purchases: "Inheritances are really driving this."

Buyers who paid cash were more likely than those who financed to tap an inheritance (28%) or money from the sale of an inherited property (21%). "They waited a significant period of time for that generational transfer of wealth to come through," Lautz said.

Personal savings remained the most common source of a down payment. But in another shift, more buyers drew on assets such as a 401(k), stocks or cryptocurrency than on help from family or friends. Lautz said older buyers have had longer to save, and suggested another reason: asking parents for a gift or loan feels different at 40 than in one's early 30s.

Agents see a shift

Jason Miller, a broker with Trust Real Estate Company in St. Cloud, Minnesota, said he saw almost no all-cash first-time buyers in the first 15 years of his career, but has handled several since the pandemic-era buying surge, when buyers needed the strongest possible offer. High mortgage rates also push buyers toward cash, he said, because financing a home over 30 years has become far more expensive. Miller added that some families pass on wealth before death, gifting money from a paid-off home or the sale of a second property — what he described as a "future inheritance."

In St. Louis, RedKey Realty Leaders broker associate Nate Johnson said relatives sometimes lend younger buyers cash to make an offer more attractive, and he has seen buyers refinance into a mortgage afterward and repay the family member. In a competitive market, he said, a batch of 10 offers might include about three all-cash bids.

Renters priced out

The trend makes the market harder for buyers who cannot lean on family wealth. Seth Daphne Esmeson, who lives in Seattle and will soon turn 33, has a good job but also student loans and a car payment, and has decided buying does not make sense at current prices. Esmeson, who is not convinced home equity would outpace other investments, said the housing market worked better for earlier generations: "We have the short end of the deal." The only route to buying would likely be an inheritance, Esmeson said, adding, "I love my mom dearly and I don't want to look forward to that."

Source: NPR News.