All-Cash Sales Dropped to Lowest in 3 Years

NAHB analysis of the most recent Quarterly Sales by Price and Financing report reveals that the share of new home sales backed by VA loans climbed substantially in the first quarter of 2024, while all-cash sales share fell by nearly 30%. However, the median purchase price of homes bought with cash continued to increase in the first quarter of 2024.

Since the Federal Reserve began raising interest rates in early 2022, the share of all-cash new home sales has increased significantly, with an average of 8.8% amid this tightening cycle. The interest rate hikes have caused the average mortgage rate to more than double since Q4 2021, as the average rate surged from 3.08% to 6.8% over the three years ending Q1 2024. The chart below illustrates how much more sensitive the all-cash share has become to changes in the federal funds rate since 2017. However, after peaking at 10.7% in the fourth quarter of 2024, the all-cash share has trended downward.

Although cash sales make up a small portion of new home sales, they constitute a larger share of existing home sales. According to estimates from the National Association of Realtors, 28% of existing home transactions were all-cash sales in March 2024, down from 33% in February, but up from 27% in March 2023.

The share of FHA-backed sales rose from 13.5% to 13.8% in the first quarter of 2024. Despite the substantial increase, the share remains below the post-Great Recession average of 17.0%. Meanwhile, the share of HA-backed sales also increased, climbing from 4.3% to 6.1%, the highest level since the second quarter of 2022. In contrast, conventional loans financed sales fell slightly from 73.8% to 73.5%.

Price by Type of Financing

Different sources of financing also serve distinct market segments, which is revealed in part by the median new home price associated with each. In the first quarter, the national median sales price of a new home was $420,800. Split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans, and cash were $472,300, $350,800, $359,200, and $432,800, respectively.

The purchase price of new homes financed with conventional and VA loans declined over the past year, while the price of homes financed with VA loans and cash increased. The largest gain occurred in cash sales prices, which rose 14.5% over the year. This is in stark contrast to year-over-year price changes in the first quarter of 2022 and 2023 (see below).