All-cash home purchases dropped to its lowest March level in six years, as mortgage rates are down, comparatively, and buyers hold negotiating power.

Just less than 29% of homebuyers in the United States paid in all cash in March, a full percentage point drop from 29.8% a year earlier and tied with 2021 for the lowest March share since 2020, according to a new report from Redfin.

All-cash purchases hit a peak of nearly 35% in 2023 due to mortgage rates reaching a 20-year high of almost 8%. Buyers who could afford a home used cash to avoid the high monthly mortgage payments, Redfin said in a press release Wednesday.

While mortgage rates remain well above pre- and mid-pandemic levels, hitting a nine-month high last week, the 30-year fixed-rate mortgage was as low as 6% in March, reducing buyers' incentive to avoid monthly mortgage payments, before climbing to 6.38% by the end of the month, according to Freddie Mac.

The housing market also favored buyers in March, as sellers outnumbered buyers by 43.1%, just shy of the largest gap in records dating back to 2013 and up from 28% a year prior, a separate Redfin report found. This meant house hunters didn't need to use all-cash offers to stand out in bidding wars.

Economic uncertainty due to the Iran War and inflation also diminished potential all-cash purchase activity, as even buyers who can afford to pay in cash may want to preserve money in savings accounts in case of emergency or other investments with potentially higher returns, like the stock market, Redfin said.

"Cash buyers have retreated," said Beth Behling, a Redfin Premier agent in Chicago, in the release. "Buyers are feeling jittery about the economy, and it's not financially comfortable to drop a huge chunk of money into a home; they may prefer to have more cash on hand."

Less all-cash purchases can be good for average house hunters as it eases the competition from wealthy buyers.

Where are all-cash purchases most common?

All-cash home sales were most prevalent in Cleveland and West Palm Beach, Florida, where 51.1% of all home purchases in March were made in cash. Detroit at 45.8%, Riverside, California, at 38.1% and Fort Lauderdale, Florida, at 38% followed.

West Palm Beach and Fort Lauderdale cracked the top five due to the high number of retirees and second-home buyers both metros attract. Meanwhile, lower home prices increased all-cash purchases in Cleveland and Detroit. Cleveland was also one of the few metros that favored sellers in March, according to Redfin.

All-cash home sales were least common on the West Coast, as Seattle, Oakland, California, and Sacramento, California, all posted shares less than 20%. In these cities, paying in cash can require several million dollars, limiting eligible buyers, the report found.