How will the Sonoma County Fires Affect the Housing Market?November 2nd, 2017 by lisasheppard
October’s wildfires left behind much destruction, with many victims now faced with the process of rebuilding. Prior to the wildfires, home prices were already steadily increasing and inventory shortages had been the norm for quite some time. It is difficult to estimate how long the rebuilding process will take, as some homeowners will rebuild and others may opt to sell their land to investors.
California is no stranger to destructive wildfires and communities rebuilding and coming back strong. Recall the devastating Oakland Hills fire that occurred in October of 1991 and damaged more than 2,900 structures. Prior to the fires, the affected homes were older 2 & 3 bedroom homes estimated at $300,000 in the early 90s. Many homeowners that rebuilt constructed homes that were larger, and home values jumped to $700,000 in the mid-90s. Despite the wildfire, Oakland Hills to this day remains a very desirable place to live.
Prior to the wildfires in Sonoma County, the median price jumped to $587,000 in September. Because the North Bay offers more affordable housing in comparison to the Bay Area and Marin counties, home buyers often flock to this area due to affordability and quality of life. This has led to the ongoing challenge of low inventory, and steady increases in median home prices. Demand has continued to exceed supply, with new construction still not adding enough homes. At the current pace of new construction, it would take at least 2-1/2 years to replace homes destroyed by the fires.
Heightened demand for homes will continue to impact pricing and inventory, and will likely lead to another temporary spike in home prices. The question is whether displaced families will be able to afford these price increases.
The long-term impact of the fires remains to be seen, as well as how long it will take Sonoma County to return to a sense of normalcy. Sonoma County residents and businesses have shown incredible resiliency and a strong desire to rebuild affected communities. While Sonoma County may take some time to rebound and rebuild, we are confident it will remain a highly desirable place to live.