A series of wildfires, fueled by paper-dry brush and the Santa Ana winds, have been ravaging the greater Los Angeles area for weeks. Hundreds of people have been ordered to evacuate as firefighters battle the flames. Though fire departments across Southern California have worked tirelessly to suppress the fires, the situation has continued to worsen. Many homes have been destroyed-- Californians left with nothing.

The question stands: what will be left once the wildfires are extinguished? And how will this massive destruction affect the Southern California housing market?

California Wild Fires Rent Property Prices

A City in Flames

Southern California is no stranger to wildfires. Its ongoing drought and scrubby vegetation make it a prime location for fiery flare-ups. However, the current fires are notable because they ignited in December, which is usually a time of year less prone to wildfires. The situation has worsened due to strong Santa Ana winds whipping up the fires and scattering sparks across the city, spreading fire from hillside to hillside.

The fires are scattered across Southern California, with the biggest being the Thomas Fire in Ventura. As of December 14th, the fire is the 4th biggest in California state history. The fire covers more than 240,000 acres, and is only 30% contained. Low humidity and winds ranging from 15 mph to 55 mph are whipping up the flames and spreading embers further afield. Local fire authorities report that they hope to contain the fire by January 7th. By that point, the wildfires would have raged for 5 weeks, irreversibly destroying the area.

Real Estate Post Fire

With the fires continuing to burn, it is far too early to predict what the housing market will look like once the wildfires are finally put out.

After similar catastrophes, prices for homebuyers tend to drop in affected areas. People choose houses both for the amenities and for the neighborhood, and even homes that have been left untouched by the fires will see their value decrease, as homebuyers do not want to look out their kitchen window to see the burnt out rubble of their neighbors' houses. Fires destroy not only residential homes, but also community infrastructure. With insurance payouts, many residents will be able to rebuild their homes, but without the schools, churches and parks that supported their town, the appeal of their neighborhood is diminished, and with that, comes depressed home values.

California Wild Fires Rent Property Prices

Experts say that insurance payouts will probably not cover the costs of rebuilding the houses destroyed by the fire. The widespread havoc will create huge demand for construction work and building supplies, which are already in short supply due to the reconstruction efforts following the deadly hurricanes in Texas and Florida earlier this year. The shortage of construction workers and building materials, paired with a spike in demand, will most likely lead to a sharp hike in construction rates that will not be covered by insurance payouts.

Though home prices might drop after a wildfire, the limited housing supply paired with a large number of residents suddenly left homeless will probably lead to rental prices increasing.

Though traditional projections forecast house prices dropping following natural disaster, housing markets vary largely based on their location. After the Sonoma County wildfires in Northern California this fall, house prices actually increased. The people displaced by the wildfires created a large market for the small selection of undamaged houses in the area. Sonoma County was wildly popular before the fires, and residents were committed to staying in the area post fire, and were willing to pay high premiums to do so.

In SoCal, Fire Strikes the Wealthy

[caption id="attachment_4004" align="alignnone" width="630"]Ventura California Ventura, California[/caption]

The recent Southern California wildfires have been most damaging to Ventura County, a coastal county to the northwest of Los Angeles, known for its affluence. The median household income in Ventura County is $77,244, which is 30% percent higher than the median income nationwide, which is $59,039. In the city of Ventura, the average rent is $2035 per month. The Thomas Fire has ravaged the area, with firefighters still working to contain the burn, and over 1000 homes have already been destroyed.

In Los Angeles proper, the Skirball Fire burned for days along the 405 freeway. Though the Skirball Fire was much smaller than the Thomas Fire, its intensity and proximity to highly populated areas of the city made it especially threatening. The Getty Museum, a large art museum and research center with an irreplaceable collection, was at risk of burning and closed down for several days. The Skirball Fire put several of the most expensive neighborhoods in Los Angeles at risk. The LA fire department ordered Bel-Air to be evacuated. The city, made famous by the TV show the Fresh Prince of Bel-Air, is one of the wealthiest areas of the city, with rents averaging $2991 per month, nearly $500 more than the average rent for an apartment in LA.

Because the fires have primarily affected expensive homes in affluent areas of California, the monetary cost of the damage will be exceptionally high. However, these wealthy residents are much more likely to be able to afford the necessary repairs, and are more likely to have generous insurance policies, so these areas will probably be rebuilt in full after the fires are extinguished.

One thing is for sure, once the fires are put out, Southern California will be transformed. Only time will tell how these changes will affect the local housing market. Explore our Southern California rental listings to learn more.

 

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