One in ten first-time homebuyers now pay entirely in cash

The path to homeownership has shifted for many residents across Central Indiana and the wider region. While the total number of first-time buyers remains low, a record portion of those who do purchase are doing so without taking out a mortgage.

A new report from the National Association of Realtors shows that the share of first-time homebuyers stands at 22 percent. This figure sits near a historic low, driven by a persistent shortage of housing inventory and elevated price points that sideline many potential buyers.

Among the buyers who are succeeding, the financial profile has changed dramatically. One in ten first-time buyers paid the full purchase price in cash. This marks the highest share of all-cash transactions since data collection began in 2003.

Jessica Lautz, deputy chief economist at the National Association of Realtors, attributes this shift to generational wealth transfer. She noted that inheritances are a primary driver for these cash purchases.

The data reveals a stark age divide within the first-time buyer demographic. The median age for all first-time buyers is now 40, a record high. For those who financed their purchase, the median age is 38. In contrast, the median age for first-time buyers who paid all cash is 54.

Lautz explained that these older buyers waited for a specific moment to enter the market. They waited for a generational transfer of wealth to occur before making their move. Those who paid cash were more likely to use an inheritance, with 28 percent citing this source, or the proceeds from selling an inherited property, which applied to 21 percent of the group.

Funding sources have also shifted away from traditional family gifts. For first-time buyers overall, personal savings remains the largest source for down payments. However, more buyers are now using assets such as 401(k)s, stocks, or cryptocurrency rather than relying on financial help from family or friends.

Lautz suggested that psychological comfort plays a role in this change. She observed that individuals feel less inclined to ask their parents for a gift or loan when they are in their forties compared to their early thirties. This hesitation contributes to the growing reliance on self-saved assets or direct inheritances.

Local real estate agents report seeing these trends play out in their daily work. Jason Miller, a broker with Trust Real Estate Company in St. Cloud, Minnesota, said he saw virtually no first-time buyers paying all cash during the first 15 years of his career. Since the pandemic, however, he has handled a number of such transactions.

Miller noted that high mortgage rates make financing a home over 30 years significantly more expensive. This drives buyers to submit all-cash offers to remain competitive. He also sees more family members gifting equity from paid-off homes or second properties, which buyers view as a future inheritance arriving early.

Nate Johnson, a broker associate with RedKey Realty Leaders in St. Louis, sees a different dynamic among younger buyers. In his competitive local market, he often sees five to six offers on a property, with three of those frequently being all-cash bids. He has observed buyers borrow cash from relatives to make an attractive offer and then refinance into a mortgage after closing to repay the family member.

For younger residents who lack this family support, the market presents a difficult barrier. Seth Daphne Esmeson, a resident of Seattle approaching age 33, said they and their spouse have good jobs but also carry debt from a car payment and student loans. They have decided that buying at current prices does not make financial sense given their debt burden and the cost of potential home repairs.