Are LA housing prices about to skyrocket due to wildfires?

The recent Palisades and Eaton fires have left a lasting impact on the housing market in Los Angeles. Insurers are reevaluating their risk models in areas previously deemed safe from wildfires, leading to a potential increase in premiums or withdrawal from the market altogether. As a result, homeowners are facing tough decisions, such as paying higher premiums or going without insurance.

1. Supply and Demand: The destruction caused by the fires is expected to result in a significant drop in housing supply and a surge in demand. The number of destroyed homes is likely to be in the tens of thousands, with even more people forced to evacuate.
2. Market Segments: Homeowners in different segments of the market will be impacted differently. Residents of Pacific Palisades may have the means for higher-quality temporary housing, affecting both the rental and for-sale markets. Meanwhile, middle-class residents in Altadena are more likely to turn to rentals, adding to the demand for such properties.
3. Rising Costs: Rebuilding for resilience comes at a higher price. Implementing flame-resistant materials and creating defensible spaces can increase construction costs significantly. Additionally, potential mandates on resiliency from city or state authorities could further raise expenses for homeowners.
4. Property Taxes: Homeowners in Los Angeles still need to pay property taxes even if their homes are destroyed. While Proposition 13 provides some relief by capping annual tax increases, Proposition 50 allows homeowners to apply for tax relief in the event of a disaster. However, the medium-term financial burden of rebuilding after a wildfire remains a challenge for many households.

Despite the challenges posed by the wildfires, homeowners in Los Angeles can seek relief through existing tax laws and potential government assistance. As the city and state address the aftermath of the fires, it is crucial for affected individuals to explore all available options to navigate the complex realities of rebuilding their homes.