Up from 30.7% a year ago, 33.4% of home purchases in April were made in cash. The share is comparable with February’s 33.5%, which was the highest level since 2014, according to a new Redfin report.
Additionally, the share of home buyers using Federal Housing Administration (FHA) loans hit its highest rate,16.4%, since February 2020—up from 10.4% in 2022.
High mortgage rates could be responsible for the increase in cash buyers, the report suggests. “A home buyer who can afford to pay in all cash is weighing two potential paths,” says Sheharyar Bokhari, Redfin senior economist. “They can use cash to pay for the home and avoid high monthly interest payments or take out a loan and pay a high mortgage rate. In that case, they could use the money that would have gone toward an all-cash purchase to invest in other assets that offer bigger returns, which could partly cancel out their high mortgage rate.”
“Buyers who can’t afford to pay in all cash also have two potential—but different—paths,” Bokhari adds. “They can avoid a high mortgage rate by dropping out of the housing market altogether, or they can take on a high rate. That discrepancy is the reason the all-cash share is near a decade high even though all-cash purchases have dropped: Affluent buyers have the choice to pay cash instead of dropping out of the market.”
Comprising more than three-quarters (76.8%) of mortgage home sales, conventional loans are still the most common type, but the share has dropped from 83.7% a year ago. Down from 8% in February but up from 5.9% a year earlier, VA loans made up 7% of mortgage home sales in April. Jumbo loans made up 6.1% of mortgage home sales in April, down from 10.6% last year.
The typical home buyer’s down payment of $52,000 in April was down 18% from a year earlier—the second largest drop since May 2020. Down payments have been falling on a year-over-year basis since November, Redfin notes. In terms of percentage, the median down payment was equal to 13.1% of the purchase price, down from 16.5% a year earlier.
The drop in down payment amounts could be in connection to the higher share of FHA loans, which require lower down payments, and the lower home prices as the typical home sold for 4% less in April than a year earlier.