As the pace of existing-home sales climbed to a multiyear high in December of 4.35 million units, a newly published analysis of market-level home sales data helps explain what purchase trends sustained the monthly rise.

Compiled in a recent analysis by listings platform Redfin, the data shows that the share of December all-cash sales fell to its lowest level since 2020, as did the share of mortgage originations insured by the Federal Housing Administration (FHA). The report covers 38 of the most populous U.S. metropolitan areas.

All-cash transactions, in which there is no mortgage loan information on the deed, declined to 29% of all purchases in these markets, down from 30.3% one year ago and a decade high of 33.7% in December 2023. The share of FHA loans declined to 14.4% from 15.1% a year ago and 15.9% in 2023.

Overall, the report underscores how incremental improvement or deterioration in affordability can have an outsized impact on distinct demographics of buyers as affordability constraints moderate.

Meanwhile, 78.6% of mortgaged homebuyers used conventional loans in December, a slight increase from 78.2% a year earlier and the highest December share since 2021, according to Redfin.

“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 quoted in the analysis.

With lower downpayment requirements that conventional mortgages, FHA loans are often favored by low- to moderate-income borrowers and first-time homebuyers. Prepaid taxes and mortgage insurance can push closing costs to a range of $20,000 to $30,000, adding a financial hurdle for a segment of borrowers that already struggles to raise a downpayment.

Based in Florida, Tomlinson also noted the monthly cost burden of escalating homeowners association fees, which can add hundreds of dollars to monthly mortgage bills.

Average rates for 30-year fixed-rate mortgages fell about 0.8% over the course of last year, spending January in a tight range around 6.1%, according to Freddie Mac data. Those declining interest costs have in turn shifted the incentive for buyers who might have paid all cash a year ago.

“When mortgage rates came down from their peak, all-cash payments became less common, as lower rates meant lower interest payments,” the report indicates, noting that the large margin by which sellers outnumber buyers means buyers do not need to resort to all-cash offers in order to win competitive deals.