Real estate tax reform is coming to the South Bay, and it could have a big impact on homeowners, buyers, and investors alike.
This month’s blog is a two-for-one: I’m covering key updates from a major new tax law, plus a quick look at Q2 housing trends across the South Bay.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (H.R. 1, Public Law 119-21) into law. At 870 pages, it covers many topics. I’ve outlined how it might impact the South Bay.
Some updates may offer new opportunities, especially for investors and long-term property holders. Others could limit certain deductions or change how gains and exchanges are taxed. Whether you’re a seasoned investor, a current homeowner, or hoping to buy soon, it’s worth knowing what’s coming.
I’ll also share a few takeaways from Q2 data and where the South Bay market may be headed this fall.
Disclaimer: This content is for general information only and not legal or tax advice. Please consult your CPA or attorney regarding your specific situation.
Let’s get into it.
The SALT Tax Increase
One of the biggest advantages of the Act is the increase in the state and local tax (SALT) cap deductions. This change could mean thousands in savings. Especially for taxpayers in high-tax states like California.
Starting in 2025, the new law quadruples the cap for most filers: For married couples filing jointly the cap is $40,000 and for married filing separately the cap is $20,000.
Previously, the SALT deduction was capped at $10,000 per return. This severely limited those in high state and local tax states to deduct full tax burdens on their federal returns. Even more so here in California, and most definitely in the South Bay.
That said, the full deduction is available only to households with income under $500,000, before it starts to phase out.
The income threshold will increase by 1% each year through 2029, rising modestly with inflation. Then, beginning in 2030, the SALT cap is scheduled to revert back to $10,000 for all filers.
In the South Bay, we face high state and local taxes. This deduction increase could mean thousands in savings for homeowners, while buyers might have a bit more capital left over.
In the South Bay, where property values and local tax burdens are among the highest in the nation, the increase in the SALT deduction cap could be a game-changer. With the limit rising from $10,000 to $40,000 for many households, homeowners may see thousands of dollars in annual tax savings.
For buyers, it may offer more than just a tax break. With a higher deduction reducing their effective tax liability, some may find themselves with more flexibility in their purchase budgets, potentially boosting buying power in a competitive market.
Bonus Depreciation
For real estate investors and business owners, 100% bonus depreciation is now permanent for eligible property placed in service on or after January 20, 2025, under the One Big Beautiful Bill Act.
This allows the full cost of qualifying expenses to be written off in the year they’re made, instead of over decades.
The Act made Section 179 permanent, authorizing businesses to deduct the full cost of qualifying equipment.
While buildings themselves don’t qualify, many parts of the building do, such as appliances, carpeting, cabinets, HVAC systems, lighting, and landscaping. These assets can be fully deducted in the first year, boosting cash flow and reducing taxable income.
Bonus depreciation is expanded to “qualified production property,” meaning certain nonresidential buildings used for manufacturing or refining can now be fully depreciated upfront, a significant change for industrial real estate.
These changes apply to both equipment purchases and qualified improvements to income-producing or commercial real estate, making it a powerful tax tool for investors planning upgrades or expansion.
Mortgage Insurance Deduction
Mortgage insurance premiums are now permanently tax deductible for homebuyers who put down less than 20%.
This deduction had been set to expire at the end of 2025, but is now permanent.
The $750,000 cap on mortgage interest deductions for acquisition debt remains in place ($375,000 for married individuals filing separately). There are no income limits for this deduction, but taxpayers must itemize, and the cap is not indexed for inflation.
The Act also permanently reinstates the mortgage insurance premium deduction, which expired after 2021. This includes private mortgage insurance, FHA premium, VA funding fees, and USDA guarantee fees. This deduction is subject to income limits, phasing out above an adjusted gross income of $100,000 ($50,000 for married filing separately).
These changes provide lasting tax relief, especially for buyers making smaller down payments.
Solar Panels
Not all of the Act is beneficial in the real estate world.
The rollback of federal clean energy credits has major implications, especially here in California where solar power thrives.
Starting in 2026, incentives like the Residential Clean Energy Credit and Energy Efficient Home Improvement Credit will expire, eliminating the 30% tax credit for solar panels and energy-efficient upgrades.
This means higher upfront costs and longer payback periods for homeowners.
Reminder: The information above is intended for general guidance only. Please consult your CPA to determine what’s appropriate for your individual circumstances.
South Bay Second Quarter Home Data 2025
The second quarter has been busy! I haven’t given this blog the love it deserves, so here are the slightly delayed Q2 numbers.
We’re officially halfway through the year, and this quarter brought balance to the South Bay housing market. Some neighborhoods are cooling, others are climbing, and there’s still plenty of movement despite tighter inventory and affordability pressure.
Manhattan Beach
The heat is cooling—just a little. After a red-hot Q1, Manhattan Beach saw prices slightly dip.
Q2 Median Price: DOWN 3.85% to $3,125,000
Q2 Closed Sales: UP 13.3% to 85 sales
But don’t confuse a price dip with weakness: closed sales jumped 13.3%, a solid sign that well-priced homes are still moving quickly.
Buyers are value-conscious here, especially in the higher-end tiers.
The Sand Section saw softer numbers, likely a reflection of oversupply and buyer pushback on premium pricing. Manhattan Village is feeling similar hesitation.
But the Hill Section and East Manhattan (Mira Costa) continue to perform, thanks to larger lots, privacy, and school access.
A two-bed condo closed for $985K, which is about as affordable as Manhattan Beach gets right now. That price floor is still alive, but rare.
Hermosa Beach
Prices are up, but signs of slowing are showing through rising inventory and fewer sales.
Q2 Median Price: UP 6.63% to $2,478,750
Q2 Closed Sales: DOWN 6.52% to 43 sales
The median price rose 6.6% year-over-year, but activity cooled with the lowest quarterly sales count in over a year. Inventory hit a four-year high, giving buyers more options and more leverage.
Well-priced homes near the beach are still moving, but sellers are starting to feel pushback, especially on older or less turnkey listings.
One notable highlight this quarter: a new-construction home on Hermosa Ave closed for $11M+, offering privacy and rooftop views without being on The Strand. This stand-out sale means to expect more eyes on Hermosa Ave going forward.
Redondo Beach
Still the most stable and diverse market in the South Bay, Redondo held steady with room to grow.
Q2 Median Price: UP 4.97% to $1,637,500
Q2 Closed Sales: UP 7.06% to 181 sales
After a flat Q1, prices rose 5% across the city, with South Redondo leading the charge, up 11% to nearly $1.8M. While North Redondo saw more modest growth, up 3.1%, as affordability pressures settled in.
The real story is in the range: a $6M luxury home and a $550K condo both sold in the same quarter, in the same local submarket of South Redondo. That kind of range in offerings is so rare, and a great aspect of the Redondo Beach housing market. It is an attractive place to buy on a wide spectrum of income levels.
Palos Verdes Peninsula
Palos Verdes Estates
A mixed Q2 for PVE, where pricing took a step back despite a slight rise in sales.
Q2 Median Price: DOWN 9.68% to $2,800,000
Q2 Closed Sales: DOWN 9.30% to 49 sales
The median dropped nearly 10% year-over-year, with buyer hesitation growing in the upper tiers. Larger homes without updates are sitting longer, and luxury buyers are negotiating harder. Still, well-located homes under $3M are seeing steady traffic. The market here is driven by long-term value, but short-term softness is showing in the data.
Rolling Hills Estates
One of the biggest gainers this quarter, RHE saw a surge in prices, though sales volume stayed low.
Q2 Median Price: UP 19.5% to $1,657,500
Q2 Closed Sales: DOWN 18.18% to 18
Prices jumped 19.5% year-over-year. Limited inventory means pricing could stay elevated, but future quarters may smooth out the spike.
Rancho Palos Verdes
This market remained steady for buyers seeking space, views, and value.
Q2 Median Price: DOWN 5.56% to $1,700,000
Q2 Closed Sales: UP 2.54% to 121 sales
Closed sales remained strong. While inventory is growing, buyer interest hasn’t slowed much. Expect a steady outlook here, unless rate or inventory shocks emerge in Q3.
Prices are rising… but will that hold in Q3?
I’ll be diving deeper into these numbers and breaking down how the One Big Beautiful Bill could directly impact South Bay real estate—in my upcoming podcast episode dropping the week of August 18. Stay tuned.