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I have taken a brief pause this week from the usual weekly write-up summary report to provide you with a quick analysis on the impacts of the recent Southern California fires that occurred less than a month ago.
The market has been very fluid since the fires began in the first week of January. Closed sales in the 6 primary cities affected by the fire have dropped considerably from nearly 15 per week in the weeks ending January 4 and January 11, to just 5 over the past two weeks. That represents a nearly 70% cumulative decline in weekly sales volume from the start of January. Winter is typically a slow time for the housing market in general, but this compares with sales that were up 2% cumulatively over the past two weeks in the rest of the state (i.e. excluding Los Angeles County).
There are also signs that the impacts will continue as buyers, sellers, and homeowners decide their next steps. For example, home sales in the sample of 6 impacted cities showed that pending sales last week rose on par with new escrows opened in the rest of the state as the winter housing market begins to thaw (rising more than 20% over the previous week). Many buyers who were in the search and/or offer stage of their home purchase may be more motivated to move forward as they expect inventory to be even tighter moving forward.
Concerns about inventory are likely justified and the long-term impacts on supply are expected to outweigh the impacts to demand even though some residents will choose to relocate rather than rebuild. New homes being added to the MLS has jumped up over the past two weeks in the affected cities, as it has in the rest of the state. However, the pace of growth in new supply was nearly double the control group as both seasonal patterns and selling of affected properties drove a bigger increase in those markets. However, with pending sales also rising, the total available inventory has been roughly flat over the past two weeks despite rising in the rest of California.
As a result of the imbalance between the impacts to supply and the impacts to housing demand, I expect affected areas and areas perceived as substitutes (either geographically or by price point) will likely see more competition for homes amongst buyers and an uptick in home prices over the medium term. This has been a consistent pattern observed after previous wildfires in Santa Rosa and Paradise, as well as the Thomas Fire from a few years ago.
Curious about what’s going on in your local market? As your trusted real estate resource, I’m always here to help—feel free to reach out with any questions. I’m just a phone call away!
