SOUTHERN CALIFORNIA, August 5, 2025 – Southern California’s luxury real estate market is experiencing a red-hot surge, as cash-rich buyers continue to dominate high-end property transactions, even in the face of new taxes and ongoing affordability concerns. In Los Angeles, more than a quarter of luxury homes priced between $1 million and $5 million were purchased entirely in cash this spring, while a staggering 56.7% of transactions for homes exceeding $10 million involved no financing whatsoever. These figures mark a decade-high for cash deals in the region and underscore a significant shift in how the wealthiest buyers are approaching real estate investment.
This wave of all-cash transactions is driven largely by affluent individuals, including Hollywood celebrities, tech entrepreneurs, and international investors, who are less affected by mortgage rates or conventional lending restrictions. Many of these buyers are seeking move-in-ready estates in affluent enclaves such as Beverly Hills, Brentwood, and Malibu, often outbidding financed offers to secure properties quickly. Real estate professionals note that the ability to close quickly and without contingencies makes cash offers increasingly appealing in a highly competitive environment.
Interestingly, this luxury boom comes despite the implementation of California’s mansion tax, a 4% levy on residential property sales over $5 million, and a 5.5% tax for those above $10 million. Initially expected to cool the ultra-luxury market, the tax has had a surprisingly muted effect on demand at the very top of the market. Rather than retreat, many wealthy buyers appear to view the added cost as a minor inconvenience or simply a price of entry for premium California real estate. The continued demand signals confidence in the long-term value of Southern California properties, especially among global elites seeking lifestyle-driven investments and safe financial havens.
While the luxury market thrives, the broader California housing landscape tells a different story. According to the California Association of REALTORS® (C.A.R.), existing single-family home sales in the state are projected to reach 304,400 units in 2025, a 10.5% increase over 2024. The median home price is expected to rise 4.6% to approximately $909,400, reflecting continued pressure from limited inventory and high demand. Yet, affordability remains deeply strained. Only about 16% of California households can afford a median-priced home, down significantly from historical norms.
This affordability crisis is particularly severe in urban hubs like Los Angeles, San Diego, and San Francisco, where housing costs have consistently outpaced wage growth. Even as mortgage interest rates decline slightly—from an average of 6.6% in 2024 to an estimated 5.9% in 2025—many prospective buyers remain priced out of the market. The challenge is compounded by a scarcity of entry-level homes and persistent zoning constraints that limit new housing construction.
Another issue affecting housing supply is a reluctance among long-term homeowners to sell, largely due to capital gains tax implications. Retirees and empty nesters, who might otherwise downsize or relocate, are often choosing to remain in place to avoid six-figure tax liabilities. A well-known Southern California couple recently withdrew the listing of their $4.5 million home after calculating that the capital gains taxes on their decades-old property would exceed $700,000. Real estate analysts warn that such decisions, while rational on an individual level, collectively exacerbate the state’s inventory shortages and make it harder for new buyers to enter the market.
As demand for luxury homes accelerates, the bifurcation of the housing market becomes more pronounced. At the top, all-cash deals and premium prices dominate, creating a fast-paced seller’s market. In the middle and lower tiers, however, aspiring buyers face tightening credit standards, escalating prices, and dwindling options. This divide raises concerns about the long-term health of California’s housing ecosystem, as fewer households are able to build equity or transition up the property ladder.
Policy experts have urged state lawmakers to consider reforms that could alleviate some of the barriers preventing home turnover. Suggestions include adjustments to capital gains exemptions for long-term owners and incentives for building more affordable housing. However, meaningful change remains slow, and the luxury sector continues to command outsized attention due to its visibility, price tags, and high-profile buyers.
Despite these challenges, the Southern California housing market is expected to remain resilient through the remainder of 2025. The region’s desirability, bolstered by climate, cultural amenities, and global cachet, continues to attract buyers across the wealth spectrum. But without broader interventions to improve affordability and increase housing stock, the gap between the luxury boom and the average homebuyer’s reality may only continue to widen. In this climate, cash is king—and increasingly, it’s the key to owning a piece of Southern California’s real estate dream.
