The California wildfires have already claimed hundreds of thousands of acres, thousands of homes, and dozens of lives. Celebrities like Miley Cyrus and Gerard Butler lost million-dollar mansions. The once picturesque—and very desirable—area of Malibu is scorched beyond recognition. So where do we go from here?
A Decade of Recovery
The areas most damaged by the California wildfires—Los Angeles suburb Malibu and Northern California’s wine region—are also some of the most desirable places to live in the state. The ripple effects on the housing market from the devastation are likely to linger years if not decades.
Tourism revenue, which is one of the main industries for places like Napa Valley and Sonoma County, will be slashed. The state’s infrastructure will need to be rebuilt. And along with private homes, there are also schools, churches, stores, and restaurants that were destroyed.
Experts agree that California will face a long road to recovery. Not everyone will choose to rebuild, and with dozens of neighborhoods completely destroyed, it’s unclear how residents would even begin. The area was already facing a housing shortage, with new construction unable to keep up with demand.
Property Values in Limbo
Do property values go up or down in the aftermath of a fire? The answer is: It depends. On the one hand, displaced residents will likely need to find someplace new to live in the same region. That means property prices could go up between 10 and 35%.
However, that’s only in areas that were left untouched by the devastation. For pockets of property that survived while their neighbors did not, it’s a different story. Expert appraisers expect to see properties in these neighborhoods drop 25 to 60% in value. Although the home might have been spared, people usually don’t want to live in areas where blackened rubble and scorched earth still linger.
Rental Market Boom
Another consequence of the California wildfires will be a huge boom in the rental market. Rental prices will rise even faster than purchase prices. And we’ll probably see homes that were previously listed for sale be withdrawn or canceled. Those properties are more valuable—at least in the short term—as rentals.
