It’s finally that time of year—C.A.R. just released its Q1 2025 Housing Affordability Index (HAI), and if you’ve followed my updates over the years, you know this report is one of the best tools for understanding where the market stands and forecasting future home prices.
This index shows how many Californians can afford to buy the median-priced home with current interest rates, assuming 20% down. A rising HAI typically means sustained price growth, while a drop may signal a slowdown.
Affordability ticked up with an HAI of 17% in Q1 2025, a modest improvement from 15% in the previous quarter. While this uptick suggests progress, the broader picture remains challenging.
For a more thorough analysis of the Housing Affordability Index, historical trends, and how this number can be used to forecast housing price, click my past blog from last quarter for the full details.
Additional details for this quarter’s report are as follows:
- The current median-priced home in California is $846,830.
- An annual income of at least $218,000 is needed to afford the median-priced home.
- Fixed 30-year–rate mortgages stand at 6.93% with monthly payments of $5,450.
Here in the South Bay, home prices are often double or even triple the California median. To illustrate what it takes to buy in today’s market, I’ve pulled some numbers from our South Bay cities, a few of my recent transactions, and local data.
Let’s get into it…
What You Need to Make in the South Bay
In a market as competitive and high-priced as the South Bay, income requirements quickly climb well above the state average. Here’s a look at what buyers generally need to earn to purchase here.
In the Golden Hills neighborhood of Redondo Beach, the rolling three month median home price is $1,610,000. To afford that, a buyer would need to earn around $414,500 per year.
Zooming in on a real-world example, my recent “tall and skinny” listing in Golden Hills closed at $1.725 million—which would require an income of approximately $445,000 annually.
For many buyers, condos offer a more affordable entry point. In Q1 2025, 24% of California homebuyers could afford the state’s $670,000 median-priced condo or townhome, which calls for an income of $172,400.
Locally, however, the bar is still higher.
Hermosa Beach
- Single-family homes: Median price of $2,650,000, requiring an income of $682,200
- Condos: Median price of $955,000, requiring an income of $245,850
In East Hermosa Beach, the median condo price is a bit lower at $801,000, but I recently sold one for $912,000, which would require an income of roughly $234,800.
Higher-End Neighborhoods: What It Really Takes
These examples provide a snapshot of South Bay affordability, but in more desirable areas like Manhattan Beach and the Palos Verdes Peninsula, the numbers climb even higher.
Manhattan Beach
- Citywide median: $3.35 million → $860,000 income needed
- Sand Section: $4,125,000 → $1,061,900 income needed
The Palos Verdes Peninsula has a range of prices as seen below:
- PVE: Median price of $2,980,000, needing about $767,100 in income
- RPV: Median price of $1,633,500, needing about $420,500 in income
- RHE: Median price of $2,249,000, needing about $579,000 in income
Behind the gates, in Rolling Hills, the median price of $4,180,000 commands and income of almost $1.1 million. The highest on The Hill.
What This Means for Buyers and Sellers
Buyers are facing tighter qualification requirements as mortgage rates remain elevated and home prices continue to outpace income growth. Navigating affordability takes planning, strategy, and often compromise.
Sellers, on the other hand, need to be tuned into where the market is headed. Homes priced at or under market value are selling, while overpriced listings are sitting due to affordability constraints. Accurate pricing and strong presentation matter more than ever.
P.S. – What We’ve Been Up To
In case you missed it, we’ve had a busy quarter! Besides the Golden Hills home and Prospect condo already mentioned above, I was fortunate enough to sell my listing with multiple offers on Lois Lane in San Pedro with stunning Harbor views. I also closed an off-market listing for a major fixer on Avenue E in Redondo Beach.
Lastly, I have two fabulous listings in the Sand Section of Manhattan Beach:
- Asking $6,950,000
- 515 Marine Avenue is a design-forward coastal retreat in Manhattan Beach’s coveted Gas Lamp District. Designed by Laney LA and crafted by Est. Collective, this minimalist residence features serene interiors, a private courtyard with firepit, and a chef’s kitchen with Arabescato Vagli marble and a 71” Lacanche range. The sunlit primary suite offers a spa-like bath and expansive walk-in closet. With curated finishes, outdoor showers, and Sonos system, this architectural masterpiece blends luxury and tranquility just blocks from the ocean.
124 17th Street
- Asking $6,250,000 (newly improved price)
- Own two exceptional residences—124 17th Street and 125 16th Place—just steps from the Strand and downtown Manhattan Beach. The front Spanish-style home offers ocean views and a sunlit porch, while the rear residence boasts a 681 sq ft rooftop deck with contemporary design. Each features 2 bedrooms, premium finishes, and private outdoor spaces. Ideal for a primary residence with guest unit, income property, or future development, this property combines unmatched location, versatility, and coastal charm.