Inheritances Push All-Cash First-Time Home Buyers to Record High

The national housing market faces a persistent supply shortage that keeps prices elevated and limits access for many prospective buyers. New data from the National Association of Realtors reveals that while the share of first-time homebuyers remains at a near-record low of 22%, a record share of those who do buy are paying with all cash.

The report indicates that one in ten first-time buyers used all cash to purchase a home. This is the highest level recorded since the association began collecting this data in 2003. Jessica Lautz, the deputy chief economist at the NAR, attributes this shift primarily to inheritances. She noted that first-time buyers who paid cash were far more likely to use inherited funds or proceeds from the sale of an inherited property compared to those who took out mortgages.

Age plays a distinct role in this financial behavior. The median age for all first-time buyers is now 40, a record high. Among those who financed their purchases, the median age is 38. However, for first-time buyers who paid all cash, the median age is 54. Lautz explained that these buyers waited a long period for a generational transfer of wealth to occur. They are older and have had more time to accumulate assets.

Funding sources have also shifted away from traditional family loans. For first-time buyers overall, personal savings remain the largest source of down payment funds. However, more buyers are now using assets such as 401(k) accounts, stocks, or cryptocurrency. Lautz suggested that some buyers in their forties feel uncomfortable asking parents for gifts or loans, a dynamic that differs from their experience in their early thirties.

Local real estate agents confirm this trend on the ground. Jason Miller, a broker in St. Cloud, Minnesota, said he saw virtually zero first-time buyers pay all cash in the first 15 years of his career. Since the pandemic, he has handled many such transactions. Miller said high mortgage rates make financing expensive, prompting buyers to offer cash to secure properties in competitive markets. He also noted that families are gifting equity from paid-off homes or second properties, treating the money as a future inheritance.

Nate Johnson, a broker in St. Louis, observed that some younger buyers borrow cash from relatives to make competitive bids. He said it is common to see five to ten offers on a home, with several being all-cash. Johnson has seen buyers refinance their homes after closing to repay their family members. This practice allows them to compete in a market where cash offers often win.

For buyers without access to large cash sums, the market remains difficult. Seth Daphne Esmeson, a 32-year-old resident of Seattle, said they and their spouse have good jobs but carry student loans and a car payment. Esmeson feels priced out of the market and questions whether home equity will outpace other investments. They currently prefer their rental home but acknowledge that an inheritance might be the only path to ownership. Esmeson noted that while they love their mother, they do not want to strategize around a potential inheritance to buy a house.