HOUSTON – (By Dale King, Realty News Report) – The share of home buyers who pay for their residences entirely in cash – a practice that peaked just three years ago — is starting to slip, says a new report from real estate brokerage Redfin.
The segment of homebuyers paying in cash topped out at nearly 35% in late 2023 because mortgage rates shot upward to the high-7% range. Buyers were inclined to pay in cash — if they could afford it — to avoid high monthly interest payments.
Redfin said the practice of buying a home totally in cash has begun to decrease – though slightly. The report says that 29% of U.S. homebuyers covered their home acquisition entirely with greenbacks in December 2025, down from 30.3% a year earlier and the lowest December share since 2020.
When mortgage rates began to dwindle from their 2023 zenith, all-cash payouts became less common because lower loan rates translated to lower, more manageable interest payments.
The average 30-year-fixed mortgage rate currently sits at 5.98%, says Freddie Mac, the government agency that expands the secondary market for mortgages in the U.S.
“For the first time in 3 ½ years, the 30-year fixed-rate mortgage dropped into the 5% range, falling even lower than [the previous week’s] milestone [of 6.1%],” said Sam Khater, Freddie Mac’s chief economist.
“This rate, combined with the improving availability of homes for sale, is meaningful and will drive more potential buyers into the market for spring homebuying season.”
There’s another reason the share of buyers paying in cash has declined: the strength of the real estate field which is currently the strongest buyer’s market in recent history. Sellers outnumber buyers by a record 47%, giving potential purchasers plenty of bargaining clout to use in search of deals.
Buyers aren’t facing much competition, meaning they don’t have to pull out all the stops (such as offering all cash and waiving contingencies) to entice sellers the way they did during the pandemic homebuying frenzy.
“The leverage buyers have when they pay in cash is unbelievable,” said Amanda Peterson, a Redfin Premier real estate agent in Dallas. “It’s not uncommon to see a buyer score a home for 10 to 20% below the appraised value if they offer cash.”
While most buyers today don’t need to buy a new house entirely with hard currency, a bucket of Benjamins can still help buyers get better terms, Redfin notes.
Sellers in some areas are watching their homes sit on the market for months without showings. That makes cash dealings more attractive because they typically close faster than transactions requiring purchasers to take out a loan.
FHA loan use hits four-year low
The Redfin report says that one in seven homebuyers (14.4%) who took out mortgages used Federal Housing Administration (FHA) loans in December, down from 15.1% a year earlier and the lowest December share since 2021.
FHA loans, insured by the U.S. government, are meant for low-to-moderate-income borrowers. They’re popular with first-time homebuyers because they have lower financial conditions than conventional loans, generally requiring only a 3.5% down payment.
“A lot of homebuyers—especially FHA buyers—are getting cold feet when they see the actual monthly payment and the amount of money they need to bring to the table at closing,” said John Tomlinson, a Redfin Premier real estate agent in Fort Lauderdale. “They may only have a 3.5% down payment, but with prepaid taxes and mortgage insurance, closing costs can rise to the $20,000 to $30,000 range. Increasing homeowner association (HOA) fees add insult to injury.”
An uptick in the share of buyers using FHA loans might be expected, given that housing costs are high and homebuyer competition is low. But FHA loans may actually be declining because housing costs are high. Many low-to-moderate-income Americans—the population that typically uses FHA loans—have been priced out of the housing market which may explain the current increase in the share of buyers turning to conventional loans.
More than three-quarters (78.6%) of mortgaged homebuyers used conventional loans in December, up slightly from 78.2% a year earlier and the highest December share since 2021.
VA loans, available to veterans, service members and their surviving spouses, were used in 7% of mortgaged home purchases in December, up very slightly from 6.8% a year earlier. VA loans require little to no down payment.
Metro-level highlights
The following stats cover 38 of the most populous U.S. metros in December 2025:
All-cash purchases
- Most prevalent in West Palm Beach where 47.2% of buyers paid in cash. Next came Jacksonville (39.3%) and Miami (39.3%).
- Least prevalent in Seattle (17.3%), Oakland (18.5%) and Sacramento (19.6%).
- The share of buyers paying in cash increased most in Providence, Atlanta and Denver and decreased most in Milwaukee, Phoenix and Cleveland.
FHA loans
- Most prevalent in Riverside, Calif., where 25.6% of mortgaged home purchasers used one. Next came Las Vegas (24%) and Atlanta (21%).
- Least prevalent in San Francisco (1.1%), San Jose (4.3%) and Anaheim (5.8%).
- The share of buyers using FHA loans increased most in San Jose, Atlanta and Cincinnati and decreased most in Providence, Cleveland and Jacksonville.
VA loans
- Most prevalent in Virginia Beach where 36.8% of mortgaged homebuyers used one. Next came Jacksonville (19.6%) and San Diego (16.8%).
- Least prevalent in San Francisco (0.7%), San Jose (1.8%) and New York (1.9%).
- Use of VA loans increased most in Jacksonville, San Diego and Orlando and decreased most in Virginia Beach, Milwaukee and Sacramento.
Conventional loans
- Most prevalent in San Francisco, where 98.1% of mortgaged homebuyers used one. Next came San Jose (93.9%) and Anaheim (90.6%).
- Least prevalent in Virginia Beach (47%), Jacksonville (65%) and Las Vegas (65.1%).
- The share of buyers using conventional loans increased most in Cleveland, Providence and Tampa and
- decreased most in Atlanta, San Jose and Anaheim.
March 2, 2026 Realty News Report Copyright 2026
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