Will California’s Latest Deadly Wildfire Devastate Home Prices—or Give Them a Boost?

JOSH EDELSON/AFP/Getty Images

Last Thursday evening, Erin Richart received the phone call that she and her family had been dreading. A friend who is a highway patrol officer had called to tell them that their neighborhood in Redding, CA, was gone—devoured by the deadly Carr wildfire.

“We thought our house had burned to the ground. I cried,” says Richart, 37, a mother of two and a local real estate agent, who was safe at her mother’s house. But a half-hour later, they got another call, this time from a firefighter friend. “He said, ‘I’m at your house, and I think we can save it.'”

The firefighters cut down all the trees and brush around the four-bedroom, three-bathroom home the couple had built five years ago. Anything flammable, like their lawn furniture, was thrown into their pool. That spared their home from the fire, which at times has burned so hot it’s created a blazing cyclone effect called a “firenado.”

The pool at the Richart family house, filled with flammable furniture

Erin Richart

Richart is one of the lucky ones. As of Wednesday morning, six people had been killed and 1,018 homes and 12 commercial buildings had been destroyed in the Carr fire. An additional 181 residences and six commercial structures had been damaged, and 2,546 more structures were threatened. More than 115,000 acres had burned, and the flames were only 35% contained. Redding, about 160 miles north of the state capital, Sacramento, sits just south of Shasta-Trinity National Forest, where the fire began.

To Californians, it has become an all-too-familiar story of devastation and loss. Over the past few years, the state has suffered through increasingly destructive fires claiming lives, reducing entire communities to ash. Last year, 46 lives were lost to wildfires and nearly 12,000 structures were destroyed, according to the California Department of Forestry and Fire Protection, or Cal Fire. The Carr fire in Redding, which began on July 23, is already the seventh most destructive wildfire in the state’s history.

And it’s not over yet.

This large-scale destruction won’t just have consequences for the lives and livelihoods of local residents. It will also affect the housing markets of these affected areas in some unexpected ways. Property values will have plummeted in some areas and will likely take years to recover.

But in a macabre twist, other parts of the region might get a substantial boost.

How do wildfires affect an area’s overall property values?

With all of those displaced residents in immediate need of roofs over their heads, prices are expected to soar for homes and rentals in those parts of the Redding region that were untouched by the fire’s fury. Prices are likely to rise about 10% to 25%, real estate appraisers say. Redding’s housing market is mostly made up of three- to four-bedroom, single-family houses and two- to four-unit, low-rise apartment buildings.

“You’ve got all these families who will need to find a place to live,” says Orell Anderson, a real estate appraiser at Strategic Property Analytics in Laguna Beach, CA. “There won’t be any vacancies.”

Meanwhile, homes that were miraculously spared in areas that were burned are likely to see price drops of 25% to 50%, he says. That’s because no one wants the view outside of their window to be the scorched earth and rubble where other homes once stood. Plus, those communities are likely to have lost many of the amenities that made them popular with buyers, such as shared facilities and landscaping.

Firefighters try to control a back-burn as the Carr fire continues to spread.

MARK RALSTON/AFP/Getty Images

Richart, the real estate agent whose home was saved, is already seeing prices go up. One home builder has boosted the prices of all of his new-construction homes by $10,000, she says. Meanwhile, she saw one rental house previously listed at $2,500 a month jacked up to $3,200 after the fires started.

“We’re seeing some things like that that people are in an outrage over,” says Richart, who works at Properties by Merit, a real estate firm. In addition, a lot of homes are going off the market.

“We’ve seen a lot of listings withdrawn or canceled either because they burned down or because they’re going to be [repurposed] for rentals instead,” she says. “A lot of people are renting to family or friends.”

It typically takes a minimum of two years for a housing market affected by a natural disaster to go back to normal, Anderson says. But it could take up to a decade.

Another factor in how quickly the area recovers is how much money homeowners are able to sink into reconstruction. One big difference between the Carr fire and the ones that tore through California’s wine country of Sonoma and Napa Counties in October and Los Angeles in December is that Redding isn’t nearly as wealthy.

The median household income was just $44,573 in 2016 and the median home list price was $299,000, according to the most recent U.S. Census Bureau and realtor.com® data. Meanwhile, in Sonoma County’s city of Santa Rosa, which wildfires ripped through last fall, the median household income was $62,705 and the median home list price was $635,000. In Los Angeles, it was $51,538 and $900,000, respectively.

And the recovery could be hijacked if there is another fire, which could permanently depress property values.

“People will forget” about a natural disaster after a few years, says Anderson. But “the second or third time, that’s the killer. People will think it’s a fire area.”

A home in Redding, CA, that was destroyed by the Carr fire on July 27

Justin Sullivan/Getty Images

Just how wildfire-prone is California?

Over the past few years, California’s wildfire season has been growing longer, inspiring some scientists to say the “season” is now the entire year.

More than 2 million households in almost 13.7 million housing units in California—about 15% of the state’s total—are at high or extreme risk of wildfire, according to a 2018 wildfire risk analysis by Verisk Analytics, an insurance, natural resources, and financial services data analytics company based in Jersey City, NJ.

Last year, 1,266,224 acres burned in the state, according to Verisk. From October through December alone, there were about $12 billion in insurance claims, according to the California Department of Insurance.

“Unfortunately, this is a continuation of what we saw late last year. We have a situation where we’re seeing dry natural vegetation combined with very hot temperatures,” Tom Jeffery, a senior hazard scientist at real estate data firm CoreLogic, says. “This year it’s even worse. You have 100-degree temperatures day after day. … It certainly amplifies the ability of that fire to burn further.”

Combine that with the rugged and steep terrain of the Redding area, and it makes these blazes that much harder to contain.

“Fires do occur in this area, but usually they’re not this big, this intense, and this fast-moving,” Jeffery says. “I would not be surprised if we see fires similar to this [elsewhere].”

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