All-cash purchases remained elevated for new-home sales in 2023, according to an NAHB analysis of the Quarterly Sales by Price and Financing Report. All-cash sales accounted for 8.4% of all sales, a 1.3 percentage point decline from the record market share in 2022, but still the second-highest share since 1991.

Over the 30-year period preceding the current, aggressive Federal Reserve rate hike cycle, the share of all-cash new home sales averaged 5.3%. In the eight quarters since, the share has averaged 9.0%. The chart below illustrates how much more sensitive the all-cash share has become to changes in the Federal Funds rate since 2017.

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 7.30% over the two years ending Q4 2023.

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, 29% of existing home transactions were all-cash sales in December 2023, up from 27% in November and 28% in December 2022.

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 fourth quarter, the national median sales price of a new home was $417,700. Split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans, and cash were $483,300, $320,400, $415,400, and $410,800, respectively.

The median purchase price of new homes declined from $457,800 to $427,400, or 6.6%, in 2023. Median prices of loan-financed new home sales fell regardless of the source. In contrast, the price of new homes purchased with cash increased 4.0% in 2023.