Since 2022, housing affordability in California has been stuck at historically low levels. The California Association of Realtors (CAR) recently released its quarterly report, and the affordability numbers for both California and LA County highlight just how tough it is for buyers to enter the market.
Here in the South Bay, however, our market shows resilience. A big part of that strength comes from the high rate of all-cash buyers in the area. While affordability continues to decline statewide, cash transactions help insulate our local market from some of the stress that rising costs bring.
Another major factor is mortgage rates. For the past five years, rates have remained elevated, putting pressure on monthly payments and limiting buyer power.
But there is some good news. We just saw a huge drop in rates last week, a welcome shift that could ease some of the affordability burden, at least in the short term.
Between cash buyers, shifting rates, and limited inventory, these forces shape who is able to call the South Bay home.
Current Affordability
Quarter after quarter, California’s housing affordability has hovered at historically low levels.
In 2025’s second quarter, the newly released CAR report shows only 15% of Californians could afford a home. The report also revealed the state median home price reached $905,680, requiring a household annual income of at least $232,400 just to qualify.
The necessary annual income is based on the ability to make monthly payments of $5,810, including principal, interest, taxes and insurance on a 30-year fixed-rate mortgage at a 6.90 percent interest rate.
While in high-demand pockets like the South Bay, the bar is even higher. Prices are steeper, competition is fiercer, and the dream of homeownership could feel even further out of reach.
Compared to the California median cost, homes here are often two to three times higher in the south Bay.
Here’s what it takes to buy in the South Bay with 20% down
- Manhattan Beach
- City median home price: $3,125,000
- Minimum income required $802,350
- Hermosa Beach
- City median home price: $2,478,750
- Minimum income required $636,424
- Redondo Beach
- City median home price: $1,637,500
- Minimum income required $420,431
- Palos Verdes Estates
- City median home price: $2,800,000
- Minimum income required $718,906
- Rolling Hills Estates
- City median home price: $1,657,500
- Minimum income required $425,567
- Rancho Palos Verdes
- City median home price: $1,700,000
- Minimum income required $426,479
As affordability becomes tougher, factors like mortgage rates make a greater impact on the market.
Rates Take a Tumble
For months, affordability has been a headline challenge across the nation. But sometimes the market throws buyers a curveball, in this case, a welcome one.
On Friday, September 5, mortgage interest rates had their biggest drop in nearly a year. The average 30-year fixed rate fell to about 6.3%.
In the South Bay, the impact is even sharper because many homes fall into the jumbo loan category. Jumbo loan products often come with more favorable pricing, and today’s numbers reflect that.
Adjustable-rate loans for luxury homes are hovering near 5.5%, with some lenders dipping as low as 5%, depending on the bank and borrower relationship.
Lower rates restore purchasing power. Many buyers can suddenly stretch their budgets by $50,000 to $100,000 more than they could just weeks ago. And, of course, less income is required to qualify for the Beach City and Palos Verdes expensive median priced homes.
This shift could be the difference between compromising on a property and landing one that felt out of reach.
For sellers, the timing couldn’t be better. As we step into the traditionally strong fall season, this surge in buyer capability could translate into more motivated showings and offers.
And for recent buyers, it may be time to call your lender. A refinance at these levels could free up significant monthly savings.
Cash Buyers
While much of California has struggled with affordability, markets across the nation have struggled with falling prices from the post Covid migration hangover and rising mortgage rates. And despite affordability challenges, South Bay home prices have held up with surprising strength thanks to the help of a high proportion of all-cash buyers.
Mortgage rates have hovered in the 6.5% range for several years, which can sideline buyers relying on traditional loans. But in markets like Manhattan Beach, Hermosa Beach, Redondo Beach, and Palos Verdes, cash purchases soften the blow.
Cash buyers aren’t exposed to interest rate volatility, meaning these cities feel less of the pressure that’s slowed down other parts of Los Angeles County.
Cash buyers in different South Bay cities in Q2 2025:
| Zip | City | Total Sales | Cash Sales | Loan Sales | Cash % | Avg Down Payment | Down Payment % | Avg Loan Amount |
|---|---|---|---|---|---|---|---|---|
| 90245 | El Segundo | 34 | 7 | 27 | 20.60% | $706,800 | 30.00% | $1,608,996 |
| 90254 | Hermosa Beach | 51 | 17 | 34 | 33.30% | $783,303 | 26.80% | $2,018,623 |
| 90266 | Manhattan Beach | 148 | 66 | 82 | 44.60% | $1,267,625 | 30.90% | $2,473,539 |
| 90274 | Palos Verdes | 120 | 37 | 83 | 30.80% | $909,391 | 32.10% | $1,887,772 |
| 90275 | Rancho Palos Verdes | 142 | 34 | 108 | 23.90% | $593,627 | 29.40% | $1,343,281 |
| 90277 | Redondo Beach | 70 | 28 | 42 | 40.00% | $652,055 | 26.80% | $1,659,885 |
| 90278 | Redondo Beach | 84 | 17 | 67 | 20.20% | $478,762 | 26.40% | $1,169,782 |
| 90501 | Torrance | 47 | 10 | 37 | 21.30% | $277,438 | 22.20% | $829,022 |
| 90502 | Torrance | 24 | 7 | 17 | 29.20% | $113,987 | 13.20% | $698,895 |
| 90503 | Torrance | 69 | 19 | 50 | 27.50% | $439,386 | 30.40% | $993,984 |
| 90504 | Torrance | 76 | 17 | 59 | 22.40% | $273,549 | 25.30% | $796,086 |
| 90505 | Torrance | 103 | 29 | 74 | 28.20% | $461,761 | 29.40% | $1,044,969 |
| 90717 | Lomita | 39 | 11 | 28 | 28.20% | $246,395 | 23.60% | $782,945 |
| 90731 | San Pedro | 87 | 13 | 74 | 14.90% | $196,758 | 19.40% | $741,195 |
| 90732 | San Pedro | 56 | 15 | 41 | 26.80% | $345,797 | 28.00% | $866,667 |
In Manhattan Beach, nearly half of all homes sold were purchased entirely with cash, with buyers putting down an average of $1.27 million. Redondo Beach (90277) follows closely behind, with 40% of transactions closed without financing. In Hermosa Beach, roughly one in three buyers, 33%, paid all cash. And in Palos Verdes Estates (90274), over 30% of homes changed hands without a loan.
Even outside the beach cities, areas like Torrance, Lomita, and San Pedro are seeing meaningful cash activity, with more than a quarter of sales being closed without financing.
Resilience in a Challenging Market
California’s affordability crisis shows no signs of easing. Yet here in the South Bay, unique market dynamics continue to set us apart.
The high rate of cash buyers helps insulate our communities from the full impact of rising interest rates, while the recent drop in mortgage rates has restored a measure of purchasing power for financed buyers. The result is a market that remains active and resilient, even as affordability challenges persist statewide.
For buyers, it may mean new opportunities for homes that once felt out of budget. For sellers, it signals the potential for stronger demand as we head into the fall.
The South Bay continues to prove itself as one of the most competitive and resilient corners of California real estate.
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]