Without fail, another year has whizzed by! As I close out this year’s files and plan for the year ahead, I find myself grateful for so many things, especially the support and trust so many have placed in me this year. Before I dive into the year end market report, I want to wish each of you a Merry Christmas, Happy Hanukkah, and Happy New Year!
2025 has been a bit of a rollercoaster, starting with devastating fires in South California that are still impacting so many families. Here in the South Bay, real estate sales started off slowly, built through the Spring, peaked in July, then slowed rapidly as we approached where we are today. Overall, the number of South Bay homes sold increased 3.4% in the past 12 months, and median prices increased 4.6% during the same period – not too bad, all things considered.
In a market where the median price of listed properties is around $1.9M but the median closed price is $1.5M, there is a wide gap between what is for sale and what buyers want. You can see it in the numbers, playing out differently across two main price points. There’s the high-end luxury market ($3.5M and up), and then there’s everything else. For every house that sold over $3.5M, nearly 9 sold under that price. This makes sense, given the number of people that can afford the median priced home compared to those shopping at the luxury levels. When you look at it from a price per foot basis, the average price/foot rose modestly (3.4%) to $967/sqft. Again, not too shabby. Of course, different markets had different results.
As far as individual cities go, Manhattan Beach was the standout, largely due to the influx of fire refugees from the Pacific Palisades. The average price of a single family home in MB rose 8.7% to $4,356,000. That was followed by Hermosa Beach which saw an increase of 7.8% to $3.7M, and Redondo Beach rose 6.8% to $2M. Palos Verdes Estates was the laggard, dropping 6.8% to $3,137,000, mostly due to the sale of more fixers and sluggish sales on the high end of the market. Closed sales in the above mentioned cities all increased in the double digits, from 12-22% depending on the neighborhood. The time it took to sell a property increased in the second half of 2025, with 39 days as the average time on the market before going into escrow. Overall supply is ending the year with less than 3 months of supply, an indicator of fewer homes on the market while buyers remain active, again, mostly under $3.5M.
At the midyear report I was saying we are in the middle of a buyer’s market, but with the decline in new inventory, I believe we are now in a slight seller’s market, especially for homes priced under $3.5M. The higher end still looks slightly more like a buyer’s market with around 4.5 months of supply, while homes priced at $3.5M and below have less than 3 months of supply. The cyclical decline in new inventory is common for this time of year, but I don’t expect supply to remain as low for long, and with plenty of buyers waiting in the wings, I anticipate an active market in the first half of 2026.
What does this mean for the months ahead? Overall, the story remains the same. The market is in the midst of a recovery after a few anemic years in terms of the number of homes sold and price growth. The trend points toward a more rational, balanced market with slight improvements in both sales volume and moderate price appreciation. Don’t expect the Fed to bail us out with low mortgage rates, but as the economy and political storylines stabilize, mortgage spreads should continue to narrow and we may see slight improvements in mortgage rates. Sellers who make their homes attractive to buyers and price appropriately for today’s market will still see strong interest, and buyers who are prequalified and have their ducks in a row will continue to be attractive to sellers. My predictions for 2026 are as follows:
After analyzing economic reports and reviewing the latest market data, here are my predictions for the second half of the year:
- Life events will drive the market – The D’s of Real Estate will drive the market – that’s diamonds, diapers, diplomas, divorce, death, and job transfers.
- Prices remain stable – Prices will continue to stabilize with moderate growth as low inventory and steady demand drives the market.
- Sellers have a slight advantage – Less competition is slowly improving sellers’ positions in the market. As new inventory comes online, the balance should shift to a more neutral market
- Entry level homes will continue selling faster than “move-up” homes – There are no shortages of young families looking to move to the South Bay; however with most current homeowners holding mortgages under 4%, move-up buyers are not as motivated to move up in price.
- Turnkey houses will have the advantage – The story from 2025 is likely to continue into 2026. The high cost of repairs will keep prices low for fixers, while move-in ready homes will remain popular with time constrained buyers. No one wants a project they can’t afford.
If you would like to read a more detailed Home Equity Report for your home or would like to discuss the market, contact me anytime. Until then, Happy New Year and I hope to see you in person soon!
Kyle
