Santa Rosa California Fires are Driving UP Home Prices

THE SANTA ROSA CALIFORNIA FIRES resulted in the destruction of 3000 homes in Santa Rosa, and another 3000 in the surrounding areas of Sonoma and Napa Counties. This means 3000 fewer housing units in Santa Rosa, and 3000 families looking for a place to live. Many of them have found rentals that their insurance companies will pay for for six months or more at prevailing rental rates. Those prevailing rental rates have gone up about double because demand was already way higher than availability before the fires. These higher rents also mean the properties have a higher value from an investment point of view, and buyers will pay more.
In addition, some of the owners of burned homes are selling out to the insurance company. This puts cash in their hands and they no longer have a home loan, so they can freely buy what they can find.
Not only burned out homeowners are looking, but there are a considerable number of burned out tenants who are looking to buy now, having realized they were just satisfied to rent before, while it was not a good investment decision. Prices have gone up over 10% in the last year, meaning that a purchaser with 10% down would have doubled their equity.
With only about 1% of homes in Sonoma County turning over annually BEFORE the fires, the shortage of homes for sale vs active buyers is even greater now.
New home projects are being overwhelmed with buyers applying to purchase them, selling out new releases within a few days, with waiting lists. The County is trying to help by getting banks to allow larger releases by the new home builders.
Finally, the new homes that will be built, .. maybe finished in 18 months, will be worth far more than the older inventory they replace. In fact, in Kelseyville, where there were the Lake County fires, the homeowners who did not get to build new from the ashes are frequently saying they awkwardly feel they are envious.
With many of the Owners of burned homes selling out, there will be speculators building these new homes on vacant lots just to put them on the market. The prices they will be able to get will be much greater than the neighborhoods would have brought before the fires.
In Summary, there are no factors that I can see that would indicate the Sonoma and Napa fires will depress home values. In fact, all indicators are that property values will be driven up, in continuation of what is already being seen. The most desirable properties are being purchased quickly with generous overbids, and frequently with cash.
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