How the Los Angeles Wildfires Will Affect the Housing Market
A series of wildfires erupted on Jan. 7, 2025, fueled by high winds and dry conditions have since scorched over 57,000 acres and more than 16,200 structures, according to the California Department of Forestry and Fire Protection (Cal Fire) website. Deeming these fires some of these most destructive in Los Angeles history.
The devastation has had a significant impact on the region’s housing market, as thousands of residents are displaced by the ashes of their former homes, based on a new report from the Realtor.com economic research team. More than $40 billion of real estate value has been put at risk.
“We have never had such devastation in Los Angeles. We are truly in uncharted waters,” Steve Frankel, a real estate agent with Coldwell Banker Realty based in Beverly Hills, California, wrote in an email. “Seeing friends and clients lose their homes and try to navigate this market has been extremely challenging.”
According to U.S. News & World Report, the loss of thousands of homes will tighten the housing supply in affected areas and surrounding neighborhoods, eventually putting upward pressure on home prices in surrounding neighborhoods as housing demand begins to recover.
As of December 2024, unsold inventory in the Los Angeles metropolitan area was 2.9 months’ supply at the current monthly sales pace, the realtors association reported. The months’ supply is a ratio that indicates how long it would take to sell all the homes currently for sale at the given sales rate. A more balanced housing market typically has a six-month supply.
The Golden State is no stranger to rebuilding after wildfires, but it could take time to bring lots back to buildable form. California’s fire codes require fire-resilient construction in high-risk fire zones. As the region starts to rebuild, increased demand could put stress on manufacturers, shippers, distributors and retailers.
Photo credit: AP Photo/Mark J. Terrill (License: https://creativecommons.org/licenses/by/4.0)
