How much of an impact will the Los Angeles wildfires have on the area housing market?
It is anticipated that this disaster will have at least some impact on home values in surrounding neighborhoods.
And some housing experts say the impact is likely to be statistically significant.
“Unfortunately, natural disasters tend to put a lot of inflationary pressures on the housing market and the local economy, which currently comes at a very inopportune time given the Fed’s struggle with reeling in inflation,” says Selma Hepp, chief economist at CoreLogic, in a statement. “Nevertheless, long-term impacts on local markets are driven by persistency and intensity of natural disasters, and proximity to jobs and urban areas in case of smaller housing markets.”
Hepp says she and her team at CoreLogic are monitoring the following impacts:
Rents: Rents surge as households who evacuated and/or lost their homes seek shelter, with the impact on rents being stronger in smaller metros with fewer housing options (leads to lower vacancy rates)
Mortgage delinquency: Early mortgage delinquencies surge as families may experience job losses and substantial dollar-value property loss
Home prices and demand: Home prices may see two opposing effects, which will take longer to observe and depend on the size of destruction:
a) Relatively faster home price growth following the disaster in surrounding markets as households who lost homes contribute to home buying demand.
b) Slowed price growth in impacted areas as damaged homes, or remaining lots, may be sold off.
c) Homes that are rebuilt on damaged lots tend to be larger and more expensive, which could add to price pressures but also decrease affordability for existing residents.
d) Home price growth and home buying demand are relatively slower long term in areas with persistent and intense natural disasters (currently observed in Gulf Coast of Florida and Louisiana and North California).
In a separate statement, Bob Broeksmit, CMB, president and CEO of the Mortgage Bankers Association (MBA), says the destruction in Southern California “is truly heartbreaking, and we stand in solidarity with the victims who have lost homes, businesses, and cherished possessions.”
“MBA also thanks the first responders and volunteers who are working around the clock to protect lives and their communities,” Broeksmit says.
“MBA and its members stand ready to help impacted families and will work with federal and state agencies to deliver assistance as soon as possible,” Broeksmit adds. “Our disaster recovery resource guide contains important information for affected homeowners, including what to do immediately after a disaster, starting with contacting their mortgage servicer, homeowners insurance company, and applying for disaster assistance with the Federal Emergency Management Agency.”