Just two months after the most destructive wildfires in California history—an event labeled the October Fire Siege—Southern California is now the target of various fires that have burned over 250,000 acres of Ventura, San Bernardino, Los Angeles, Riverside, Santa Barbara and San Diego counties (as of Dec. 12). Five of these fires were 100-percent contained last week, while another five continue to burn.
Even the star-studded neighborhood of Bel Air was under strict evacuation measures. The 16-acre Moraga Estate purchased by Rupert Murdoch—founder of News Corp, of which Move Inc., parent company of realtor.com®, is a subsidiary—was also evacuated due to its proximity to the Skirball Fire. The evacuations have now been lifted, and the estate only suffered minor damages to its vines.
Over 190,000 residents are still under mandatory evacuations while firefighters are working on containing the fires. Most groups (around 4,000 firefighters) have been assigned to the Thomas Fire, which spans over 360-square-miles of Ventura and Santa Barbara counties and reached the Pacific on Dec. 5 after starting 30 miles inland the day earlier. It has burned over 230,000 acres and has destroyed at least 1,000 homes and buildings. It was 20 percent contained as of Dec. 12.
Firefighters are struggling to contain the massive fires that are flaring up with the help of an enduring drought and Santa Ana winds, which essentially funnel the fires through California’s canyon landscape at high speeds. Last Wednesday, the helicopters and planes used in conjunction with firefighters could not fly because of the 50-plus mile-per-hour winds, delaying containment efforts.
Mike Kelly, REALTOR® at Keller Williams Realty in Sonoma County, who experienced the October firestorms in Northern California, believes the Santa Ana winds will play a role in future buying activity.
“I think the reoccurring Santa Ana winds will discourage folks from buying in those areas,” says Kelly. “Our ‘wind event’ up here was an abnormality in our overall weather patterns where the Santa Anas occur each year with more and more frequency and strength.”
The wind’s power will be a determining factor in how long it takes to put the massive fires out. New analysis from CoreLogic shows that over 86,000 homes in Southern California are at risk due to the firestorms. CoreLogic estimates that the reconstruction cost value (RCV) in Los Angeles and Ventura counties will total nearly $30 billion.
According to Zillow research, about $6.4 billion worth of residential real estate (an estimated 1,700 homes with a median home value of $2,859,000) are in mandatory evacuation zones for the Skirball Fire, while around $1.7 billion worth (about 3,100 homes with a median home value of $563,500) are in the burn zone for the Creek Fire (based on the Dec. 8 Evacuation Map published by CAL FIRE). This accounts for about 6.8 percent of Ventura County’s total residential real estate (by value) and about 6.3 percent by count, reports Zillow.
Real Estate in Northern California
While Southern California deals with the onslaught of fiery outbursts, their neighbors ot the north are still reeling from the impact of the October wildfires, which killed 44 people and reduced whole neighborhoods to ash. Adam Menconi, broker/owner of Prosper Real Estate in Sonoma County, had over 40 clients who lost their homes to the fires.
“If you were in the middle of a deal, the deal is literally toast. You can’t convey something that doesn’t exist; therefore, the deal falls apart,” says Menconi of the 2,000 homes the Santa Rosa market lost, which included apartments, mobile home parks, smaller suburban homes in the $500,000 price range, larger subdivisions in the $700,000-$800,000 price range, and Fountaingrove estates that vary from $1 million-$4 million.
According to Kelly, “Sales expectedly dropped in October following the fire. Prior to the firestorms, a very tight housing market existed.”
Kelly says the housing market was further impacted by the loss of 5,200-plus homes and the flood of buyers looking for replacement properties.
“Month’s supply of inventory is down 40 percent over last year with only a 1.4 month’s supply and [an average of] 44 days on the market (DOM),” says Kelly, adding that the new construction market is up 25 percent over last year and that the market is at 99 percent of listing price for all sales—signaling an incredibly tight market, as indicated by the number of sales that are over 110 percent of the asking price.
Displaced individuals are jumping at any opportunity to own a home again, even if it means purchasing way over market value and investing more funds than they may get in return when it comes time to sell.
“Once people started getting checks from their insurance companies, people started buying with “monopoly money” and the overbids started,” says Menconi. “[It was] getting excessive, but the bottom line was that they just needed a place for their family.”
Californians impacted by the wildfires are facing various challenges. Many are thinking of rebuilding, but may be priced out of the area. In addition, lots are selling for much less, but residents will have to wait and see if new building codes will be imposed. One of the biggest challenges are insurance claims, which are taking too long for buyers who need their reimbursement to qualify for a home loan, and certain policies are not enough to recoup losses. Menconi states that there have been varied results when it comes to insurance.
“Some clients who have great insurance are actually coming out ahead after the fire, and others, who didn’t have the best insurance, are getting left behind a bit and have very few options,” Menconi says. “They can’t afford to sell because their mortgage is high, and they can’t rebuild since the insurance doesn’t cover the whole cost of the rebuild. And remember, construction prices just shot through the roof, so people are dealing with that, as well.”
According to California’s insurance commissioner Dave Jones, property damage claims in response to the Northern California fires exceeded $9 billion. The figure encompasses data from 260 insurers that reported total claims as of Dec. 1, which included damage to more than 21,000 homes and 2,800 businesses.
“These numbers not only represent staggering losses to tens of thousands of Californians,” said Jones in a statement. “The October wildfires that devastated whole communities and tragically cost 44 people their lives have now proven to be the most destructive and deadliest in our state’s history.”
The newly displaced population, combined with price gouging and disaster fraud, is also exacerbating an already widening homelessness problem in Santa Rosa. The FBI has been called in to address fraudulent activity, such as duplicate claims, that dramatically increased in response to the fires; however, Menconi doesn’t believe these challenges will detract buyers from purchasing in the area.
“Yes, it was a horrible tragedy, and, yes, the fires in Southern California are still going,” Menconi says, “but there’s not a place in the world that I love more than Sonoma County, and I know many, many people feel the same.”
Although California has suffered unimaginable losses, and has to repeat the experience with the newly sparked wildfires in the south, real estate professionals and state residents are coming together in aid and support.
“As a community, everyone worked together,” says Menconi of the industry’s response to the Sonoma County fires. “Agents dropped the ego and really worked with each other, looked out for each other and started caring for each other as people again and not just competing agents. It brought back some humanity. Every conversation ended with ‘Be safe’—it’s hard not to care after that.”
While the real estate community has provided emotional support during the October Fire Siege and now the Southern California fires, it has also set up fundraisers and donation sites to help agents and families who have been impacted.
“One major fund here in Sonoma County raised in excess of $15 million in two weeks,” says Kelly. “We’ve been working on smaller outreach efforts with REALTORS® suffering loss, as well as families in need. Our regional North Bay Association of REALTORS®, which serves all fire-affected areas, has led a fundraising drive and kept records of membership touched by the firestorms.”
In addition to relief efforts provided by individual brokerages and agents, the California Association of REALTORS® (C.A.R.) is offering financial assistance via grants to REALTOR® family members who have been affected by the wildfires.
“Grants provided by the fund are used to help members of the REALTOR® family—REALTORS®, their staff, and association members and their staff—who have incurred substantial losses due to wildfires and other disasters by distributing grants of $1,000 to $10,000,” says a statement the C.A.R. website, where individuals can donate to disaster relief.
Stay tuned to RISMedia for more developments.
Liz Dominguez is RISMedia’s associate content editor. Email her your real estate news ideas at firstname.lastname@example.org.
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