Redfin: 29% of Home Purchases Are Made in Cash
(Photo courtesy of Johnson via Unsplash)
Just under three in 10 U.S. homebuyers paid in all cash in August, down insignificantly from 29% a year earlier, according to Redfin, Seattle.
The prevalence of all-cash payments peaked at nearly 35% in late 2023 and early 2024 because mortgage rates peaked in the high-7% range during that time. Buyers were inclined to pay in cash if they could afford it to avoid high monthly interest payments.
When mortgage rates came down from that peak, all-cash payments became less common.
Redfin noted another reason the share of buyers paying in cash has declined from its peak: this past summer was the strongest buyer’s market in over a decade, and a less competitive market means fewer buyers have to pay cash to beat out other bidders.
While the share of buyers paying cash has declined from its high point, it is essentially unchanged from last year. Redfin attributed that to mortgage rates sitting between 6.5% and 6.6% in August, mostly flat from a year before, keeping interest payments the same.
Fewer all-cash buyers can be good news for house hunters who don’t have the means to purchase a home without a loan, especially when paired with the fact that buyers in most markets hold negotiating power. Now that rates have declined a bit more to a weekly average of 6.27%, all-cash purchases may become even less common.
“First-time buyers have more opportunities than they did when the market was hot; they’re no longer competing against 10 other offers from people who are either paying in cash or shelling out a 50% down payment,” said Kathy Scott, a Redfin agent in Phoenix.
Median Down Payment, in Dollars, Hits Record High
The typical U.S. homebuyer’s down payment reached $70,000 in August, up 6.1% year over year and the highest dollar amount ever.
In percentage terms, the typical homebuyer’s down payment was equal to 18.6% of the purchase price, up from 17.8% a year earlier and the highest August level since 2013.
Down payments are rising in dollars largely because home prices are rising; when homes cost more, buyers need to put down more money. But Redfin noted higher prices aren’t the only reason: home prices are up roughly 2% year over year, and down payments are up 6%. Downpayment growth is outpacing home-price growth mainly because when housing costs are high, affluent people with the means to make bigger down payments are more likely to buy homes. It’s also likely that some wealthy Americans are making large down payments rather than paying cash as mortgage rates gradually decline.
“There are a few reasons why down payments are rising in percent terms,” the report said. “One is similar to the reason mentioned above: many of the people buying homes today are affluent, meaning they’re able to make larger down payments. They’re more likely to make big down payments when mortgage rates are fairly high, like they are now, to save money on interest payments down the line. Similarly, many of the people purchasing homes are move-up buyers who are able to roll over sizable equity from their previous home into a down payment. And with rates high and affordability tight, some lenders prefer bigger down payments to mitigate risks.”
