The sudden increase in demand for housing from those who lost their homes in the Los Angeles fires, combined with the drop in the number of available homes, will likely cause housing prices — to buy or rent — disparate in the coming months and years, according to real estate agents and economists.
Martin Johnson and his fiancée, Caleigh Chapman, spent several years restoring and renovating their Altadena home by hand. It only took a few hours to lose the house and everything in it last week.
“We didn’t have a kitchen for a year and a half. We had just cooked our first dinner in the house right after Christmas,” said Johnson, co-owner of LA Woodshop, which provides woodworking spaces and classes for people who want to do it themselves. or build furniture professionally.
“We spent many nights sanding doors and windows by hand,” Chapman said.
“The floors took 18 months to complete,” Johnson said. “It took weeks to finish transforming the house into a work of art, and now it’s gone.”
Se Dealing with this financial and emotional loss isn’t enough, they are faced with what was already a difficult and expensive housing market in Southern California. The huge forest fires that made thousands of families rush to find a place to live, probably for the next few years, could make everything even worse.
They have been staying with friends since being evacuated, dealing with the stress and anxiety that Chapman says makes it difficult for her to sleep.
“I think we’ll find something,” Johnson said. “Whether this ends up being a lifestyle downgrade for more money is hard to say. We can’t be too selective. We couldn’t be selective even before 10,000 houses were burned.”
Scarce supply, increased demand
Some real estate agents are saying they are already starting to see rental unit prices rise by hundreds, if not thousands, of dollars per month.
“We were already in a housing crisis. Even before that, we didn’t have enough houses to sell. We didn’t have enough houses to rent,” said Los Angeles real estate agent Brita Kleingartner.
“Now there is overwhelming demand, and we are just starting to see what that looks like. All of our agents had their phones ringing off the hook. Most screenings are for families who have lost everything.
“It’s very concerning,” Kleingartner added. “Next week will be truly heartbreaking.”
Prices for some units that were on the market have risen 15% to 20% in the last week, said Jeremiah Vancans, another Los Angeles real estate agent.
“Demand is going to skyrocket,” he said. “Inventory was already very low. I imagine this will create more upward pressure on prices.”
But he said the long-term impact on prices is difficult to determine as people are trying to get an idea of How much can they receive from insurance? for their losses.
“It’s too early to really say how this will affect the Los Angeles market,” he said. “People are still numb. The fires are still burning.”
Real estate agents reported working 12 to 14 hour days due to increased demand.
“There are basically no rentals,” said Jade Mills, Coldwell Banker Beverly Hills real estate brokerage. “I’ve been on the phone for two days asking my sellers if they would be willing to rent, or calling rentals that are no longer available.”
Her son also lost his home in Pacific Pallisades.
Restoring the city’s lost housing stock is expected to take at least three to five years, according to realtors who spoke to CNN, because of the time it takes to clean up burned homes, reach settlements with insurance companies, go through the process of licensing and then finding the labor needed to rebuild.
Vancans said that in addition to rising prices for some rental units, he is concerned that those who lost their homes may receive cash offers for the property where their homes once stood — offers coming from what he calls “predatory buyers” who they are trying to take advantage of financial misfortune.
A Study of Past Wildfires by Redfin showed that average home prices can actually fall in the short term as homes damaged by fire or lots that need to be cleared of debris sell at a discount. But this decline does not last.
“Like much of the U.S., California is facing a severe housing shortage,” said Daryl Fairweather, chief economist at Redfin.
“The bushfires themselves are also making housing more expensive. After a city burns down, builders come and build new homes, which are usually more expensive. And homeowners who stay often invest in making their homes more fireproof, which increases property value.”
The market was already very tight. Data from the California Association of Realtors shows that fewer than 30,000 homes, townhomes and condos were sold last year in a county of 3.7 million homes, meaning less than 1% of homes were selling.
Now, suddenly, it is estimated that 10,000 homes may have been lost to the fires, and counting.
And it’s not just that 10,000 people are suddenly added to the shopping market. It’s how they were added too.
“For the last five years, it’s been a bidding war town,” real estate agent Brock Harris said. “Any house that cost less than $2 million was getting 10 to 20 offers. Now, with people buying with insurance money, this is going to be significantly skewed.”
Harris and his wife, Lori Levine Harris, who is also a real estate agent, have been trying to lend a hand to people who call them.
Johnson and Chapman are staying in an outbuilding on their property temporarily. And Lori Levine Harris has been compiling a spreadsheet among real estate agents of furnished homes available for rent over the past week. But there isn’t enough to go around.
“Short-term furnished housing – that’s what people are going to need. My phone won’t stop ringing,” she said. “We already have a limited supply of housing, and losing 10,000 homes will worsen this situation.”
Fortunately for people who are already renting apartments or houses, Los Angeles and most communities in the county have rent control that limits rent increases at the end of an existing lease.
But those looking to move into an apartment vacant because of the fires will likely face significantly higher rents.
Joe Thompson, who lives in Pacific Pallisades with his wife, two young children and two dogs, said he is very lucky his home was not completely destroyed by fire.
But there was enough damage that it could be months before it’s safe to move back in.
His family was staying at a hotel, and they were on their way to look at a rental unit for the first time on Monday morning. But he said he saw prices rising a lot from what they were previously listed on various online sites.
“Financially, I think the insurance plan we have will be OK to help with living expenses,” he said.
“It’s just that the abusive price increase and the competition for rent with everyone who is going through something even worse now is difficult. You’re trying to line up rentals, but you have no idea how long you’ll need them. And the only way to differentiate yourself (when trying to sign a lease) is to pay 12 months of rent in advance.”
