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California Wildfires Cause Dire Housing Inventory Shortage

According to a piece from the 
LA Times [1], 3,000 homes in Santa Rosa, California, or 5 percent of its housing stock, was destroyed by wildfires. “We had a housing problem three weeks ago; now we have a housing problem minus 3,000 more houses.” Santa Rosa’s Mayor Chris Coursey told the LA Times.

Wildfires in Northern California have led to the destruction of 5,700 homes and businesses, based on Clear Capital’s monthly Home Data Index (HDI) August report released Tuesday. Most of these structures were in Sonoma County and many residents were already suffering from extremely low long-term rental options and a short-term rental market. “The fires in and around Sonoma County will drive more upward price movement and we’ll likely see near zero inventory,” said Clear Capital President and Co-Founder Kevin Marshall.

Senior economist at the California Association of Realtors, Oscar Wei, said the the housing supply around Santa Rosa was already low before, but with a $600,000 median home price, it paled in comparison to San Francisco, where median home price is over a million dollars. In an interview with the LA Times, Wei discusses the appeal of moving to the less expensive city of Santa Rosa compared to San Francisco.

“Because of that difference, in the last few years, a lot of people who could not afford to live in San Francisco or Santa Clara, they move farther north, out to counties like Sonoma,” Wei said. He predicts however, that once the city starts to rebuild, Santa Rosa will still be a desirable location to live in again. “In California, every area near the mountains, we could have fire,” he said. “I honestly don’t think that, as far as Santa Rosa and wine country are concerned, in the long term it will affect sales that much. People will go back.”

According to Clear Capital, the decrease in housing supply will only add more stress to those already affected as access to housing becomes more expensive.  Still, the Western region as a whole continues to beat the South, Northeast, and Midwest in quarter-over-quarter price growth at 1.3 percent. The other regions measured at 0.8, 0.6, and 0.6 percent respectively.

“The Western region’s growth is due, in part, to first time home buyers and those looking to re-enter the housing market post-foreclosure during the recession. Along with scarce home inventory and a strong tech economy, home price appreciation is being driven upwards,” said Marshall.