The rising price of homes and the increasing share of the downpayment required is giving a significant advantage to buyers able to fork over the cash required to close the deal, according to a new study by Redfin.
Almost three in ten (28.8%) of U.S. homebuyers paid in all cash in August. The typical downpayment shot up 6.1% from the previous year to $70,000 – 18.6% of the purchase price -- and the highest dollar amount ever.
Even though the share of homebuyers paying in cash was slightly lower than the 29% who did the same in 2024 the report found the difference was negligible because mortgage rates and interest payments were essentially unchanged.
“Down-payment growth is outpacing home-price growth mainly because when housing costs are high, like they are now, affluent people with the means to make bigger down payments are more likely to buy homes,” the report stated. “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.”
In addition, many people using this technique are likely to be move-up buyers able to use the equity in their former homes to make a larger downpayment. Furthermore, some lenders prefer bigger downpayments to mitigate risks.
Despite the leg up achieved by the wealthy, the report says there are still opportunities for buyers with smaller purses. The slight decline in all-cash buyers opens opportunities for those who need a loan to make a purchase, especially in a buyer’s market with eager sellers. And those only able to make small downpayments and find less competition.
The report also revealed geographic differences in the use of all-cash and downpayments.
The metros most likely to encounter all-cash purchasers were West Palm Beach (43.4%), Cleveland (42.1%) and Miami (39.2%). About half the metros studied saw an increase in the share of homes purchased with cash. The biggest boosts were in Baltimore, Riverside, CA and Providence.
The metros least likely to see all-cash purchases were on the West Coast: Oakland (18.8%), San Jose (19.1%) and Seattle (20.5%). The largest share declines were in Milwaukee, New York and Cincinnati.
Dollar down payments rose in half the metros studied, especially in Providence, Chicago and Washington, DC. They fell the most in Riverside, Seattle and Denver. In percent terms, down payments rose in 28 of the metros analyzed.
The typical downpayment nationwide was 17%. However, in some California metros the amounts were much larger: 25% in Anaheim, San Francisco and San Jose. The smallest down payments were in Virginia Beach (3%), Las Vegas (9.4%) and Tampa (9.8%).
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