...
By Giulia Carbonaro
Senior Reporter
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
In the aftermath of the devastating wildfires that ravaged Los Angeles County in January, homeowners who survived the blazes are facing the impossible choice of rebuilding—if they can cover the enormous expenses and can rely on their insurers' money—or selling their properties at a significant loss.
The burnt site of a four-bedroom home in the affluent neighborhood of Pacific Palisades, which last sold in 2005 for $1.54 million and has been valued as high as $2.7 million, was put on the market by the owner for an asking price of $999,000 earlier this month, and it's now in escrow for more than $1 million after receiving more than 60 offers in 10 days. According to real estate experts, the property is one of the first to sell in the neighborhood after the fires.
Speaking on a recent Bloomberg Businessweek's podcast, co-host Tim Stenovec commented on the home sale saying that the owner "is getting much less than the home's pre-fire value rather than waiting to rebuild on the property that she's owned for 20 years."
Read More on News
Why It Matters
The wildfires across Los Angeles County are estimated to have destroyed over 12,000 structures, including many homes.
According to a Redfin report published on January 17, 14 percent of homes within the perimeters of the Palisades and Eaton fires were damaged or destroyed. That's a total of 6,354 homes, 5,449 of which were destroyed and 905 were damaged. The vast majority of the properties destroyed were single-family homes.
Many of those who have lost their homes to the fires will be able to count on their insurers paying what's needed to rebuild them, but just as many will have only a fraction of the cost of rebuilding their homes covered by insurance, or none at all.
What to Know
The Pacific Palisades home on Avenida de la Herradura which sold for $1 million earlier this month was built in 1976 and was valued as high as $2.7 million, according to Zillow estimates. The median home price of a property in Pacific Palisades was $3.3 million at the end of last year, according to Redfin.
But the homeowner, Terri Bromberg, doesn't seem to mind the loss, as long as she can leave the area. She told Bloomberg that she will use most of her insurance claim to repay the Pacific Palisades property's $656,000 mortgage and that she's already in contract to buy a smaller home in Santa Monica after losing everything she owned in the fires.
"My daughter said she doesn't want to go back and live in the hills. It was too scary," Bromberg, who is nearing 70, said. "It used to be paradise. Eventually it will return."
What this makes clear is that not all homeowners in the area will decide to stay and rebuild their homes destroyed by the fires. "You've got to wonder what happens in this area in terms of rebuilding. Who ends up staying, who ends up rebuilding. What the insurance market looks like to get those homes insured," Stenovec said.
Richard Schulman, the selling agent for Bromberg's property, told Bloomberg: "I can just tell you, generally, that people selling are going to take a huge financial hit."
...
In Altadena, the site of a burnt property on a 9,100-square foot lot is currently being sold for $449,000, taking a massive price cut from the $965,000 it fetched when it last sold in 2023.
On Zillow, there are currently 66 properties listed for sale in Pacific Palisades, only two of which have taken a price reduction. In Altadena, there are 18 properties for sale in the real estate marketplace, two of which have had their listing price slashed by sellers. These numbers suggest that a majority of homeowners in the areas ravaged by the fires are still figuring out what to do next.
What People Are Saying
Daryl Fairweather, Redfin's chief economist, previously told Newsweek: "Most people leave L.A. for affordability reasons, and the destruction to the housing supply will worsen affordability, and cause more people to leave for more affordable housing."
Nancy Wallace, a professor of finance and real estate at UC Berkeley's Haas School of Business, told Newsweek: "L.A. County is going to rebuild. It's going to be very painful—for the most part, people in Altadena can afford to rebuild only a fraction of the homes they lost. I think that homes will have to be built to code, which is going to be expensive for many people; they're possibly going to have to get other mortgages or have larger mortgages or use equity to do these home improvements.
Chris Schafer, Insurify's senior editor for home insurance, told Newsweek: "[Property insurance] rates in Los Angeles County are going to depend on how much it costs to repair the homes [destroyed by the fires] and on the frequency of extreme weather events. If that frequency continues to increase, even if property levels drop, I think we're going to see [property insurance] premiums increase, because rates are based on how much insurers have to pay out."
What's Next
A majority of housing experts expect that L.A. County will rebuild in the coming months, but the market is likely to face rising home prices and shrinking availability as the gap between demand and supply widens.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines