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November 1, 2019 at 8:00 AM EDT
Redfin Report: Los Angeles, Orange & Santa Clara Counties Are at Risk of Losing More Than $2 Trillion Worth of Housing Value Due to Wildfires
Redfin agents say this year's relentless wildfires, along with sky-high insurance premiums and mandatory electricity shutdowns, are causing residents to leave California

SEATTLE, Nov. 1, 2019 /PRNewswire/ -- (NASDAQ: RDFN) -- Four counties in California top the list of places at risk of losing the most housing value due to destruction from wildfires, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage. Los Angeles County, home to more than $1.2 trillion worth of homes and one of the regions most susceptible to wildfires in the U.S., stands to lose the most housing value. Next come Orange County ($502.6 billion in total housing value), Santa Clara County ($488.5 billion) and San Diego County ($417.6 billion).

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Lindsay Katz, a Redfin agent in Los Angeles, said this year's wildfires are impacting local residents more than they have in the past.

"I think this year is a turning point," Katz said. "People who live in Southern California and people buying homes here are getting fed up because not only are the wildfires particularly bad right now, but they've been relentless over the last few years. In the past, residents would get a few years off between fires and they would kind of forget about them—but we haven't even recovered from the Woolsey Fire that hit Malibu last November, and people are evacuating and losing their homes again."

"A friend of mine was forced to evacuate from her home in Westlake Village during the Woolsey Fire, and although her house didn't burn down, she decided to move to Denver to get away from the threat of wildfires. I also worked with a couple a few months ago who sold their home in Los Angeles and moved to Gilbert, Arizona," Katz continued. "Once you're impacted multiple times and you know people who have lost their homes, the threat feels more real."

Many of the most desirable and expensive areas in the country are at high risk for destruction from wildfires. Seven of the 10 counties at risk of losing the most housing value on account of potential wildfires are in California, and many of them are in expensive areas. Two of the remaining three are in Texas, and the other one is Clark County, Nevada, home to Las Vegas.

Redfin agents in Sacramento and El Dorado counties in Northern California are also reporting a major shift in housing markets located in fire-prone areas, particularly those where premiums for fire insurance are rising and where PG&E is cutting power for days on end in an effort to prevent wildfires, something that could continue for decades. Debbie Olson, a Redfin agent in Sacramento, said homebuyers and sellers in the area are concerned about the impact of wildfires on home prices and total housing costs.

"Earlier this year, I worked with a couple who was selling their home in Auburn [located northeast of Sacramento] and looking to buy in the same neighborhood. But they were priced out because insurance premiums have risen so much due to wildfires," Olson said. "They were quoted around $9,000 per year just for fire insurance. Even though the seller offered to pay half the cost for the first two years, my clients ultimately decided to buy a home in a neighborhood that's less fire-prone to avoid paying such a high premium."

Ellie Ruiz Hitchcock, a Redfin agent in El Dorado County, located between Sacramento and Lake Tahoe, said the housing market is adapting to the wildfires and mandated rolling blackouts this fall. As buyers become more nervous about purchasing homes in fire-prone neighborhoods, sellers are getting creative with incentives, offering things like covering the cost of fire insurance, trimming trees and brush to create a defensible space and, as a last measure, lowering the price of their home.

"It hit me about a month ago that the new normal in our area includes scheduled electricity blackouts to allow utilities time to rebuild and upgrade infrastructure, which is giving buyers pause but will help property values in rural communities in the long run," Hitchcock said. "Sellers are struggling right now as often the best-case scenario is settling for a lower sale price than they would have gotten a year ago, and the worst-case scenario is holding off on entering the market until the fires and blackouts settle down. That's a tough conversation for agents to have with sellers, and one that's gotten very real in the last six months."

The seven counties at risk of losing the most housing value due to wildfires are also places where housing supply is declining annually. For instance, supply was down nearly 12 percent year over year in Los Angeles County in September, and it declined more than 17 percent in Orange County. Wildfires in those areas could exacerbate the housing shortage, partly because many homeowners are choosing not to rebuild after their homes are destroyed. 

The average acreage burned by wildfires annually in the U.S. has nearly doubled since the beginning of the century, from 4 million between 1990 and 2000 to 7 million between 2008 and 2018.

"Homes in places like Malibu, the hills around Los Angeles and wine country in Northern California have historically been desirable because the natural beauty of the surroundings has outweighed the risk of natural disaster," said Redfin chief economist Daryl Fairweather. "But with homebuyers and sellers in fire-prone parts of California really starting to feel how environmental risk factors are impacting both the safety and value of their homes, long-term demand will change, though California overall is unlikely to lose its luster. Demand and prices for homes in fire-prone areas will go down, but as a result they'll increase in safer parts of the state. California is in the midst of a housing shortage, and the state should take wildfire risk into account when deciding where to focus its building efforts."

To read the full report, please visit: https://www.redfin.com/blog/california-wildfire-hazard-risk-housing.

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate brokerage, combining its own full-service agents with modern technology to redefine real estate in the consumer's favor. Founded by software engineers, Redfin has the country's #1 brokerage website and offers a host of online tools to consumers, including the Redfin Estimate, the automated home-value estimate with the industry's lowest published error rate for listed homes. Homebuyers and sellers enjoy a full-service, technology-powered experience from Redfin real estate agents, while saving thousands in commissions. Redfin serves more than 85 major metro areas across the U.S. and Canada. The company has closed more than $85 billion in home sales.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, subscribe here. To view Redfin's press center, click here.

 

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SOURCE Redfin

Redfin Journalist Services: Isabelle Novak, 206-876-1352, press@redfin.com