Number of First-Time Buyers Shrinks While Record Share Pays Cash for Homes

First-time homebuyers account for just 22% of buyers, remaining near a record low as housing shortages and high prices put homeownership out of reach for many, according to a new report from the National Association of Realtors. Those who are buying, however, are older and wealthier than in previous years. One in 10 paid in cash, the highest share since the association began collecting this data in 2003.

First-time buyers who paid cash were more likely than those who financed their homes to rely on an inheritance (28%) or proceeds from selling inherited property (21%). They were also older.

“Inheritances are really driving this,” said Jessica Lautz, Deputy Chief Economist at NAR.

NAR reports that the median age of first-time homebuyers remains 40, a record high. Among first-time buyers who financed their purchase, the median age was 38; for those who paid in cash, it was 54. “They waited a significant period of time for that generational transfer of wealth to come through,” Lautz said.

Among first-time buyers overall, personal savings were the most common source of down-payment funds. In another shift, more buyers drew on assets—such as a 401(k), stocks, or cryptocurrency—than received financial assistance from family or friends. Older buyers have had more time to build savings, Lautz said, but she believes another factor is at play: “I think it’s uncomfortable to ask mom and dad for a gift or loan when you’re hitting 40 versus your young 30s.”

Inheritance Aiding First-Time Buyers

The share of first-time buyers using an inheritance is likely to rise in the coming years as baby boomers reach their 80s and beyond. As the report noted, “there is a growing divide among those who are saving independently and priced out of homeownership, versus those who are waiting on the sidelines but then given a generational transfer of wealth.”

However, real estate agents across the country are noticing the shift. But Miller has seen several such cases since the COVID-19 pandemic, when home purchases surged.

“They knew they had to absolutely have the most sterling offer possible to compete in the competitive marketplace,” Miller said.

High mortgage rates are also prompting more all-cash bids, Miller said, because borrowing to finance a home over 30 years has become much more expensive. And families do not always wait until someone dies to transfer wealth. Miller is seeing more clients receive help from relatives who may have paid off their homes or have equity in a second property they can sell, “[…] gifting some or all of that money.”  They see it as a form of “future inheritance,” he said.

Nate Johnson, a broker associate at RedKey Realty Leaders in St. Louis, said some younger first-time buyers receive money from relatives who are merely “lending them the cash” to strengthen their bids. Despite a significant downturn in much of the national housing market, he said competition among buyers remains fierce in his local market.

“They just know that if we’re looking at five or six offers on the table, let’s call it 10 offers on the table, which is not uncommon…maybe three of those offers will be all cash,” Johnson said.

After purchasing a property, Johnson has seen some buyers obtain a mortgage through refinancing and repay the family member who helped them.

Consumer Testimony

The growing prevalence of all-cash offers makes the market even more challenging for people trying to save for a down payment amid today’s soaring home prices.

“For a long time I thought I wanted to buy a house,” said Seth Daphne Esmeson, who lives in Seattle.

They and their spouse have good jobs, but also debt, including a car payment and student loans. Not only does Esmeson think they may never be in a position to buy, they’ve also decided it does not make sense at today’s prices.

“Being that debt burdened, and also having to fix things on your home, like, it sounds really terrible,” Esmeson said.

Esmeson is also unconvinced that home equity would outperform other investments. They are satisfied with their current rental and landlord, so they plan to stay for now. Even so, it is frustrating that the housing market was more favorable to previous generations. “We have the short end of the deal,” they said, adding that “the gap is expanding.”

Esmeson explained that there is most likely only one way they might ever be able to buy.

“If I received an inheritance,” Esmeson said. But “I love my mom dearly and I don’t want to look forward to that, or really want to strategize around that.”

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