Just under three in 10 (28.8 percent) homebuyers paid in all cash in March, down from 29.8 percent a year earlier and tied with 2021 for the lowest March share since 2020, according to a report from Redfin.
The prevalence of all-cash home purchases peaked at nearly 35 percent in 2023 because mortgage rates hit a two-decade high of almost 8 percent during that time. Buyers who could afford to were inclined to pay in cash to avoid sky-high monthly mortgage payments.
Now, the share of homebuyers paying in cash is declining because market conditions have shifted. While mortgage rates remain elevated well above pre- and mid-pandemic levels, they eased to 6.18 percent in March from recent highs of 7 percent or above. For homebuyers, that reduces the incentive to avoid financing altogether by making all-cash purchases. At the same time, the housing market is buyer-friendly —with many more sellers than buyers — in most of the country, meaning house hunters don’t need to use all-cash offers to stand out in bidding wars.
Widespread economic uncertainty — including concerns about the Iran war, rising oil prices, inflation and recession jitters — is also playing a role. When the economy is topsy-turvy, even affluent buyers who can afford to pay cash may be inclined to preserve money in savings accounts or other investments rather than tie it up in a home. Some buyers are opting to finance their purchase to keep cash on hand in case of emergency.
All-cash purchases becoming less prevalent can be good news for typical house hunters because it eases a bit of competition from wealthier buyers. Cash buyers often have an edge because sellers see their offers as faster and less risky.
“Cash buyers have retreated,” Beth Behling, a Redfin Premier agent in Chicago, said in the report. “Buyers are feeling jittery about the economy, and it’s not financially comfortable to drop a huge chunk of money into a home; they may prefer to have more cash on hand.”
Even for those who can afford to buy a home in cash, there can be financial advantages to taking out a mortgage, according to Redfin. A homebuyer may choose to take out a home loan and invest cash in another investment with potentially higher returns, like the stock market, which can make financial sense if investment gains outpace mortgage rates.
All-cash purchases were most prevalent in Cleveland and West Palm Beach, Fla., where more than half (51.1 percent each) of all March home purchases were made in cash. Next came Detroit, where 45.8 percent of purchases were made in cash, Riverside, Calif. (38.1 percent) and Fort Lauderdale, Fla. (38 percent).
All-cash purchases are common in places like West Palm Beach and Fort Lauderdale because they attract a lot of affluent retirees and second-home buyers, according to Redfin. In places like Cleveland and Detroit, relatively low home prices play a role: Investors and regular homebuyers can more easily afford to buy homes outright in lower-cost markets. Additionally, Cleveland is one of just a few metros that’s not a buyer’s market, meaning there’s competition among buyers that may incentivize cash offers.
Cash purchases were least prevalent on the West Coast. In Seattle, 17.6 percent of home purchases were made in cash in March, the smallest share of the metros Redfin analyzed. Next come four California metros: Oakland (18.4 percent), Sacramento (19.9 percent), Los Angeles (20.5 percent) and San Diego (20.7 percent).
Even affluent buyers often choose to finance at least part of their purchase in expensive markets like Seattle and Los Angeles because paying cash can require several million dollars. That limits the pool of buyers who can realistically buy a home outright.