California’s local real estate industry faces major changes!

The Golden State has seen the most destructive wildfire season on record. Camp Fire, completely wiped out the town of Paradise, burned 153,336 acres, and destroyed 18,733 buildings. At the same time, the Woolsey Fire burned 96,949 acres, threatening both Thousand Oaks and Malibu, in addition to destroying 1,500 buildings. According to The New York Times, these two fires forced 81,000 people to evacuate and leave their homes. 

So, what does that mean for the local real estate market in California? Michael Tachovsky, a Realtor with Berkshire Hathaway Realty’s Laguna Beach office and an expert in real estate damage economics for Landmark Research Group, said that even though wildfires are something of a regular thing in the state, the difference with these recent blazes is they are in more densely populated areas with higher real estate values. Usually, after similar major disasters, real estate prices tend to drop in the affected area.“With most natural disasters, you have homeowners who are displaced while they are repairing their homes, but with wildfires what’s interesting is the rate of rebuilding compared to other natural disasters is significantly lower.” The amount of time it takes for insurance to come through also plays a significant role in a shift in the multifamily space in the area. “They need somewhere to go and the multifamily space is a logical step,” Tachovsky said.

Even properties untouched by the fire will see a decrease in their value. Why? People choose houses for both the amenities and the neighborhood. Wildfires don’t only destroy residential properties, but also the community’s infrastructure and, thus, reduces the quality of life there. No one wants to look out their windows to see the remains of their neighbors’ homes. Additionally, neighborhoods might become loud with construction zones as people try to rebuild their communities. Not to mention there is always the fear that another fire could strike. All of these factors make it less appealing to live in the affected area and, thus, property values will drop. These price drops are good news for real estate investors according to International Association of Real Estate Professionals (IARP) who states that this is a great time for real estate investors to swoop in and buy these homes and flip them in a few years. Typically, real estate prices are affected only in the immediate aftermath of a wildfire and rebound within 2 -5 years after the area is improved. Investor activity has already moved up from 1% of buyers to 8% after the fires.

On the other hand, prices have shot up for homes and rental properties in areas in California that were untouched by the wildfire’s fury. The limited housing supply combined with the added demand of people looking for new places to live is driving up prices. Seeing as the California housing market is already pricey, many people turn to rental properties until they figure out their next move. Thus, California real estate investors who own rental properties can expect to see a shift to multi-family homes and increasing rental rates. 

One thing is for sure, Californians have become accustomed to the threat of wildfires after decades of headlines in a state that sometimes seems to be perpetually on fire. Only time will tell how these wildfires will affect California’s real estate market, but as long as people still have the desire to live in the region, developers will continue to build in high-risk areas. 

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Stay Connected

10250 Constellation Blvd
Los Angeles, CA 90067
(310) 691-5476 
Business Hours: Monday-Friday, 8am-4pm PST