More often than not, the scourge of a wildfire does not end when the flames are extinguished, and the consequences of losing your home can last for years.
According to a new study by Redfin, in the three years following a fire, home prices only rose by 21% on average while homes outside of the wildfire area grow by 33%.
According to report authors Lily Katz and Sebastian Sandoval-Olascoaga, in areas within fire perimeters, home purchases declined by 38% in the following three years. This is due to the lack of available properties that are available to sell.
Buyers are also leery of returning to areas that went up in flames. Areas inside of a wildfire perimeter saw purchases drop by 43%, while areas outside of the fire perimeter only dropped by 3%.
"Like much of the U.S., California is facing an acute housing shortage. That means there are often intense bidding wars for the homes that are for sale—even those in fire-prone areas—which contributes to the rise in prices," Redfin Chief Economist Daryl Fairweather said. "The wildfires themselves are also making housing more expensive. After a town burns, builders come in and construct new homes, which are typically more expensive. And homeowners who stay frequently invest in making their homes more fireproof, which increases property value."
According to the report, all-cash offers after a fire also increase by 17% due to new builders and investors entering the local market taking advantage of the circumstances. And when homes are rebuilt, they are typically rebuilt with luxuries and fire-resistant materials, which also drives up costs.
"In the Napa Valley, builders show up right after fires happen. Communities want to rebuild, so local authorities tend to fast-track permits and design reviews, and push properties hit by fires to the front of the line," said Christopher Anderson, a Redfin real estate agent in Napa, California. "They build homes in four to six months after fires, whereas normally it can take a year and a half for a builder to get a shovel in the ground."
A full copy of the report can be viewed here. Data for the report was collected from county records, Multiple Listing Service (MLS), the California Department of Forestry and Fire Protection’s Fire and Resource Assessment Program covering the five largest fires between 2010–2020.