The impact of the recent Los Angeles wildfires on home prices has been a hot topic, and the answer might surprise you. Some areas have seen prices rise, while others remain stagnant. Let’s dive into the factors affecting the real estate market in LA County post-wildfires.
How Wildfire Victims Influence the Market
First, it’s essential to consider the displaced homeowners. Many who lost their homes are not looking to buy again in another fire-prone area. Instead, they are entering the rental market, seeking long-term leases of one to two years while they determine their next steps. Rebuilding takes time—often three to eight years—due to permitting, construction regulations, and insurance claims.
The Insurance Challenge
A crucial aspect of this situation is insurance payouts. Many homeowners may receive insurance settlements ranging from $1 million to $3 million, but rebuilding costs have skyrocketed. Previously, construction in these areas was around $400 per square foot; now, it’s closer to $800–$1,000 per square foot. This gap makes rebuilding difficult, especially for those who still owe mortgage payments and property taxes.
Where Are People Moving?
Displaced homeowners are relocating to safer, more desirable neighborhoods. For instance, those affected by the Palisades fire are moving to Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo, Brentwood, Santa Monica, and Venice. The Eaton fire victims are heading toward La Cañada, Pasadena, and Monrovia. These buyers and renters are driving up demand in these areas, leading to rapid price appreciation.
Some homeowners, particularly elderly residents, are opting to move in with family rather than rebuild, further reducing housing inventory.
The Effect on Home Prices
As a result, certain areas are experiencing significant home price increases. Manhattan Beach, for example, has seen a two-to-three-year price markup within just a month. In contrast, areas in northern LA County, like the San Fernando Valley, have not experienced a mass influx of wildfire victims. While some people are moving to Sherman Oaks, Tarzana, and Encino, most wildfire-affected homeowners are choosing to relocate to Orange County rather than stay in LA.
Meanwhile, the overall LA market has been rebounding from stagnation due to interest rates. Earlier this year, mortgage rates exceeded 7%, causing a slowdown. Now, with rates in the high 6% range, market activity has picked up, especially in the $1.3 million price range, where competition is fierce. Homes priced over $2 million are still sitting longer due to affordability constraints.
Inventory & Future Outlook
Inventory in LA County remains historically low—about half of pre-pandemic levels. Most new construction is luxury housing priced at $1.7 million and above, leaving fewer options for mid-tier buyers. With interest rates playing a significant role, many displaced homeowners with pre-existing low mortgage rates will face a stark reality: new payments could range from $8,000 to $25,000 per month, making buying less feasible for some.
Conclusion
While home prices in LA County are gradually rising, areas directly affected by wildfires could see dramatic price increases due to high demand and limited supply. As the market continues to evolve, we’ll be closely monitoring the trends in the coming months.
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I’m Scott Himelstein with the Scott Himelstein Group, your Los Angeles Real Estate Agent—thanks for reading!
