Topline:
Some 12,000 homes were destroyed in the Eaton and Palisades fire. Real estate experts tell LAist that surrounding counties are likely to absorb some of the displaced people, but with a few exceptions, they’re not seeing a big effect just yet in places like Orange County.
Why might that be? Many of the displaced are still staying in hotels, Airbnbs, or with family. Some with higher incomes might be holed up temporarily in second homes.
What are the exceptions? The very high end of the rental market — leases for $20,000 a month and up — has seen a big jump in both L.A. and O.C., said Steven Thomas, chief economist with Reports on Housing, which analyzes real estate trends in Southern California. The number of high-end residential leases that closed in January shot up 233% in L.A. and 238% in Orange County. (Although the actual numbers of people who can afford that price are quite small, 180 in L.A. and 27 in O.C.)
What’s the expected long-term effect? Despite the region’s infamous housing deficit, the real estate market in L.A. and surrounding counties does, technically, have enough inventory to absorb all of the fire victims, experts told LAist. But it will take time for people to decide whether to rebuild and where to live in the meantime.
Read on ... for a closer analysis of fire recovery and what it could mean for housing and Southern California real estate.
Some 12,000 homes were destroyed in the Eaton and Palisades fires. Real estate experts tell LAist that surrounding counties are likely to absorb some of the displaced people, but with a few exceptions, they aren't seeing a big effect just yet in places like Orange County.
“ I honestly think the data isn't there yet,” said Eric Engelbert, a Costa Mesa-based real estate broker who produces weekly reports on the local housing market. “ We don't know how many people are moving down here.”
Engelbert and other O.C. real estate experts told LAist they haven’t seen changes that would suggest a major surge in demand for O.C. homes since the fires hit in early January. With a notable exception — high-end rentals.
The number of homes leased in January for at least $20,000 a month shot up 238% in O.C. and 233% in L.A., according to Steven Thomas, chief economist with Reports on Housing, which analyzes real estate trends in Southern California. “ So you can see there is an immediate impact in the luxury space in leasing,” Thomas said of the fires.
The actual numbers of people willing and able to pay that price, though, are quite small — 180 high-end rentals in L.A. and 27 in O.C. closed last month, according to Thomas.
Why fire victims are more likely to rent
Josh Schroeder, a real estate agent who mostly works in Laguna Beach and other coastal cities in South O.C., said he’s working with five clients who lost their homes in the Palisades fire. All but one of those clients, an older couple, are looking to rent, not buy a home.
Displaced residents are considering many factors when deciding where to live, including commute time, schools and, of course, cost. But Schroeder thinks the biggest factor in residents’ decision-making is the lack of clarity on insurance payouts for fire victims — most are still navigating the insurance process — and deciding whether they can afford and want to rebuild.
“Insurance is really going to be a huge indicator on what we can expect as far as how our market's gonna be impacted,” Schroeder said of the O.C. housing market.
What’s the expected long-term effect?
Despite the region’s infamous housing deficit, the real estate market in L.A. and surrounding counties does, technically, have enough inventory to absorb all of the fire victims, experts told LAist. But the increased demand will likely continue to push prices up, at least within legal limits — California Attorney General Rob Bonta has already filed several lawsuits over rent-gouging.
Orange County already had the fastest-rising housing costs in Southern California, according to a report released late last year by the O.C. Business Council. In December, the median list price for O.C. homes was $1.35 million, according to data from Realtor.com.
Like California as a whole, O.C. simply hasn’t built enough housing to keep prices from skyrocketing, Wallace Walrod, chief economic advisor for the O.C. Business Council, told LAist last month. “That's projected to continue, unfortunately,” he said.
Thomas said fire victims may have more luck finding apartments than single-family homes in both L.A. and O.C. “There's more standing inventory of apartments now that there have been so many high rise apartments built recently,” he said.
It’s also possible that people who currently own homes in O.C. — seeing an opportunity in the increased post-fires demand — will put them up for rent or sale. Engelbert, the real estate broker, said he has seen an increase in listings in O.C. in recent weeks, though he said it’s hard to tell whether that is related to the fires.
Schroeder, the Laguna Beach real estate agent, said he has several clients who own second homes in O.C. and had never before rented them out, but “ out of the kindness of their heart” are considering renting to fire victims.
But for now, stories like these are anecdotal. Schroeder said it will likely be a year, maybe more, before we understand the full effects of the fires on Southern California real estate. Displaced residents "are going to know what's going on with their insurance; they're going to know the amount of time it's going to take to rebuild. ... We're going to know a lot more in one year,” he said.
