How did the recent wildfires affect OC housing? The recent Eaton and Palisades fires destroyed approximately 12,000 homes and has led to a significant displacement of residents. Many of these are now seeking housing in neighboring regions, including Orange County. [source]
Increased Demand in Orange County
Realtors in Orange County have observed a notable influx of families from Los Angeles seeking both temporary and permanent housing solutions. This surge in demand has been particularly evident in the luxury real estate rental sector. We have noticed this locally with increasing demand for housing in areas such as Laguna Beach, Corona del Mar and Newport Beach.
It is interesting to note that high end rentals saw the most increase in demand. 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.
Impact on Housing Prices
Historically, areas affected by wildfires experience an initial decline or stagnation in home prices, followed by a gradual recovery. For instance, after the Woolsey Fire in 2018, Malibu saw a median home price decrease of 11%, from $2.39 million in November 2018 to $2.15 million by July 2020. Prices then began to rise, surpassing $3 million by December 2022. [source]
In Orange County, the sudden increase in demand from displaced residents has the potential to drive up housing prices, especially in sought-after neighborhoods. This trend could exacerbate the existing housing affordability issues in the region. It is a little too early to tell to what extent home prices have gone up. Especially since many displaced families are still waiting to find out what their insurance pay-outs will look like. It is quite possible that once there is more clarity on this, the demand for homes for sale will increase as well. So how did the wildfires affect OC Housing? I would expect upward pressure on home for sale pricing over the course of the next year.
Rental Market Pressures
The influx of displaced families has intensified competition in the rental market. Reports indicate that some landlords in the Los Angeles area have increased rents by an average of 15–20%, with certain instances of rents nearly doubling. This practice has raised concerns about price gouging during emergencies. Let this also be your reminder that it is illegal to significantly raise the rent during natural disasters, even if the tenant is willing to pay that price. Attorney General Rob Bonta announced last month, that his office sent more than 200 warning letters to hotels and landlords accused of price gouging. The AG also has criminal investigations into price gouging underway.
Specific data for how the recent wildfires affect OC housing is limited still. Yet, we have seen some additional pressure on the housing market, and particularly the high end rental market. As some of the displaced families might choose to stay in Orange County we can expect continued upward pressure on pricing locally as a result of the wildfires.