Happy New Year and welcome to 2026.
There’s something refreshing about the clean slate of a new year. It’s a natural reset, a chance to set goals, fine-tune your plans, and for real estate nerds like myself, reflect on where the market might be headed.
That means it’s time for one of my favorite annual blog traditions: my South Bay Fearless Predictions.
These blogs have been running for years now. Some of the calls have held up quite well. Others… not so much. But that’s the whole point. Forecasting can get messy.
So, before we dive in, here’s your usual disclaimer: these are educated guesses designed to get you thinking critically about the market. This isn’t investment advice. Always do your own research and make decisions based on your personal situation.
Market recap of 2025
To kick things off, the 2025 numbers tell a clear story: the South Bay market is now fully split in two.
At the beach, prices are charging higher again. On the Palos Verdes Peninsula, things are flat at best and trending lower in some pockets.
Here’s the rolling 12-month median price movement by zip code, based on CRMLS data, comparing the full 2025 calendar year (starting from November). For deeper context, check out my previous post, “Best and Worst Performing Markets.”
90266 – up 11.7% (Manhattan Beach)
90278 – up 10.0% (North Redondo)
90254 – up 7.1% (Hermosa Beach)
90274 – down 5.9% (PVE, RH, RHE, and PVP)
90277 – up 3.3% (South Redondo, includes parts of Hollywood Riviera)
90275 – up 0.7% (Rancho Palos Verdes)
If you remember last year’s recap, every one of these zip codes posted gains year over year. That was the 2024 rebound after a tough 2023 when prices dropped across the board.
Now, heading into 2026, the backdrop is solid for the beach cities while conditions on The Hill remain cooler. Even with that split, the overall market has returned to more traditional fundamentals. That kind of balance is a welcome sign.
2026 Fearless Predictions – Big Picture
Here are the high‑level calls first, with detail below:
The “Great Housing Reset” Reaches the South Bay
Rates Drift Down, but Meaningfully Drop in LATE 2026
Prices Go Sideways Nationally, Slow‑Walk Higher in California
Transactions Finally Grow Again (South Bay Volume Surprises)
Affordability Improves on Paper, Still Hurts in Reality (until tear-end)
Long-term bet: Wearables Change Everything
1. The “Great Housing Reset” Reaches the South Bay
Redfin is calling 2026 the start of what they’re labeling the “Great Housing Reset.” Meaning we’re entering a multi-year stretch where income will finally start outpacing home prices, sales begin to climb again, and the market slowly returns to some sense of normal after a chaotic, rate-shocked run.
Nationally, they’re projecting a modest one percent rise in median prices and about a three percent uptick in existing-home sales. The bigger theme is a healthier alignment between wages, prices, and interest rates.
That reset will show up in the South Bay, but it won’t look quite the same.
We’re still a high-income, low-supply, coastal market. So here, the reset means less chaos, more balance. The bidding wars taper off. Sellers no longer get to name their price without pushback. Buyers regain some leverage and start negotiating again, instead of simply reacting.
Where this really shows up is in buyer psychology. With interest rates expected to finally move lower by the end of the year, buyers will feel like the wind is at their back. That shift could push more deals across the finish line in the second half of 2026 and give us a surge of activity heading into 2027, especially if President Trump applies pressure on the Federal Reserve as expected.
Which brings me to interest rates…
2. Rates Drift Down, but Meaningful Drops Come Late in 2026
The big names aren’t calling for anything dramatic on the interest rate front. Zillow, C.A.R., and most Wall Street research outfits expect a slow grind lower. Their consensus is that mortgage rates will settle somewhere between the mid-five percent and low-six percent range over the next couple of years, assuming inflation behaves.
Redfin is a bit more specific, anchoring their 2026 forecast on rates easing from around 6.8 percent in spring 2025 to roughly 6.3 percent by next year.
That would be a welcome shift for buyers, but let’s be clear: it’s not a rewind back to 3 percent. This isn’t a rare miracle. It’s just a slow thaw.
Here’s where I part ways with the mainstream outlook.
I think the President will get his way in 2026. A new, more dovish Fed chair will take the reins. And while rate cuts won’t come immediately, I believe we’ll see real movement by the end of the year. Not just a modest slide, something more substantial.
For the South Bay, that means enough rate relief to boost buyer confidence in the spring and summer, but still not enough to make median-income buyers competitive in median-priced beach markets. Payment sensitivity is still a thing.
That said, jumbo rates will be the wild card.
If the new Fed chief and the administration push hard enough, I believe jumbo rates could dip to 5 percent by Q4, possibly even touch 4.75 percent. That kind of drop would be a real catalyst for our market, especially in high-end segments.
So here’s the fearless call: a sleepy start to the year for rates, followed by a late-year drop that catches most people off guard. Sub-5 percent jumbo rates before the year is out.
Bold? Sure. But someone has to say it.
3. Prices Go Sideways Nationally, Slow-Walk Higher in California
Zillow sees U.S. home values staying mostly flat this year, with about 1.2% growth. Inventory is building, demand is soft, and that’s keeping a lid on appreciation. Redfin is in the same camp, projecting roughly 1% national growth as buyers remain cautious thanks to high, though slightly easing, rates and a softer economy.
California, as usual, is doing its own thing.
C.A.R. expects a 3.6% increase in the state’s median home price for 2026. That’s a modest rebound after a quiet 2025. Layer that onto South Bay coastal markets, which already sit well above the state median, and here’s the call: Most South Bay submarkets finish the year with one percent to 5 percent price gains.
A few overextended or rate-sensitive spots may end flat or slightly negative. I expect that weakness to continue on the Palos Verdes Peninsula.
This isn’t 2020 to 2021 with buyers tripping over themselves. And it’s definitely not 2008. It’s a slow walk higher, with more variation between submarkets.
The Beach Cities will lead the way. PV will lag.
And long-term California owner-occupied homes will continue to outperform the nation. You just have to be patient.
4. Transactions Finally Grow Again (South Bay Volume Surprises)
Zillow expects national existing‑home sales to rise to about 4.26 million in 2026, a roughly 4% increase from 2025 as rates ease and more would‑be movers finally act. Redfin is in the same ballpark, calling for roughly a 3% jump in existing‑home sales year‑over‑year, with a meaningfully better spring season than 2025 thanks to lower rates. C.A.R. sees California single‑family sales up about 2% in 2026.
The fearless call: South Bay transaction volume grows faster than those numbers. After years of owners being completely frozen by golden handcuffs, 2026 is the year more local sellers decide “good enough” on rates and list. Between pent‑up life events and a slightly better payment picture, expect South Bay closed sales to grow by double digits—off historically low levels over the past couple of years.
This would be the right time to start off a career in real estate as the last two years have been brutal for the housing services sector (look no further than Home Depot struggles…that may finally turn).
5. Transactions Finally Grow Again (South Bay Volume Surprises)
Zillow expects national home sales to rise to 4.26 million, about 4 percent, in 2026. Redfin is calling for a 3 percent increase, helped by lower rates and a better spring season. While, C.A.R. sees California single-family sales ticking up 2 percent.
Here’s the fearless call: the South Bay will beat those numbers.
After years of being frozen by golden handcuffs, 2026 is when more local sellers finally say “good enough” and list. Whether it’s upsizing, downsizing, or just life moving forward, expect a wave of long-postponed decisions to finally hit the market.
With slightly better rates and serious pent-up demand, I see South Bay closed sales jumping by double digits. That growth will come off historically low volumes, but it still marks a real shift.
If you’ve been thinking about starting a real estate career, now may be the right time. The last couple of years have been rough across the housing services sector.
6. Affordability Improves on Paper, Still Hurts in Reality
The fearless take: in the South Bay, any improvement in affordability will be nearly invisible to the average buyer.
Redfin and Zillow both see wages growing faster than prices in 2026, but that small edge, maybe one to three percent, won’t move the needle here. Our prices are already too high, and jumbo loan amounts mean even modest progress doesn’t magically turn renters into buyers.
What actually makes a difference?
Lower mortgage rates giving high-income buyers more room to spend
Golden handcuff sellers finally letting go of lower rates
That distinction matters. A shift from terrible to tolerable isn’t a fix, but it may be just enough to get things moving again.
If the Fed Chair and President Trump manage to push rates down meaningfully by late 2026, as I’m calling for, then real affordability gains could finally show up.
In the end, it still all comes down to mortgage rates.
Long-Term Bet: Wearables Change Everything
It may not feel close, but wearable tech, especially items like smart glasses, is on its way to shaking up real estate and construction in a big way.
Glasses with cameras will change the game for virtual showings and remote walk-throughs. Buyers and agents won’t need to be in the same zip code, let alone the same room.
Subs will use wearables to scan job sites and generate bids without ever stepping foot on the property. AI tools will plug in behind the scenes, spitting out numbers faster and more accurately than ever.
Buyers could tour homes with glasses that answer questions in real time. “When was the roof replaced?” “What’s the square footage of this room?” “Does this qualify for a jumbo loan?” No more flipping through listings or waiting for agent callbacks.
And on the construction side, things get even more interesting.
Smart glasses will guide workers step by step on builds. They’ll speed up training, reduce mistakes, and allow site supervisors to monitor progress remotely. That could help solve the labor shortage by making it easier for younger, less experienced workers to get up to speed fast.
This tech won’t roll out overnight, but once it clicks, it has the potential to make housing faster to build, cheaper to deliver, and easier to sell.
It’s not here yet. But it’s coming. And when it does, it’ll be a massive shift.
Final Thoughts
After a few years of wild swings, the South Bay housing market is starting to settle into something that looks more sustainable. Rates are drifting lower, buyer confidence is improving, and we’re seeing just enough movement on affordability and inventory to keep things alive.
It’s still a tricky market. Buyers are price-sensitive. Sellers have high expectations. But the gap between them is starting to close, and that’s where the action happens.
This year won’t be a breakout. It won’t be a bust either. Think steady. Think strategically.
If you’re looking to make a move in 2026, timing and patience will matter. And as always, I’ll be here tracking the data, watching the trends, and sharing my take as it all unfolds.
Thanks for reading, and cheers to another year of navigating the South Bay market together.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]