The deadly wildfires that roared through Sonoma and Napa counties this week, destroying thousands of homes, might also scorch the Bay Area’s already brutal housing market for months or years to come, experts warned Friday.
An estimated 2,800 homes have been destroyed in the wind-whipped infernos in Santa Rosa alone, and a total of about 5,700 homes have been lost in Northern California — a catastrophe that potentially leaves several thousand people to determine whether to eventually resume living on their devastated properties or to move elsewhere.
As a result, an already strained housing market — whose grim signature is skyrocketing home prices — could soon become even tighter as displaced residents begin scouting for places to live until their homes can be rebuilt, or they decide to relocate.
“It’s already a tight housing market, one where home prices have risen a lot over the last few years,” said Frank Nothaft, chief economist with CoreLogic, which tracks the residential market. “And apartments are tough. Rents are up. Prices are up. Rental vacancies are well below the national rates.”
This adds up to a challenging hunt for a place to live, even temporarily, for those forced from their homes.
“We are losing about 4 percent to 5 percent of the housing stock in the (Santa Rosa) area,” said Oscar Wei, a senior economist with the California Association of Realtors. “This will cut into the supply, short term.”
Compared to the entire Bay Area, Santa Rosa’s roughly 2,800 lost homes is a small portion — 0.1 percent — of the housing in the entire nine-county region. According to the U.S. Census Bureau’s American FactFinder, the Bay Area had 2.8 million residential units in 2015, the most recent year available.
But it’s much more of an impact in Santa Rosa. The destruction of the roughly 2,800 homes represents 4 percent of the Sonoma County city’s 67,000 residential units.
“If you destroy 2,000, 3,000 homes, that just constrains the market even further,” Nothaft said. “Housing is already scarce.”
The combined loss for those residential structures is likely to be staggering. Realty experts say the median price of homes in Santa Rosa during August was $585,500. That could mean the combined value of the destroyed residences is roughly $1.63 billion.
Finding a place to live will be just one of the challenges for displaced homeowners, especially if they decide to return to their original residences.
“It could be six to 12 months, or even longer, to rebuild the house, depending how the insurance claims go,” Nothaft said. “Then, after that, they have to find the contractors and the construction workers. There’s a shortage of skilled construction labor right now.”
Experts say there’s no definitive answer as to whether home prices will fall, rise, or neither.
“Pricing can go down, possibly, because the area is burned out and not an attractive place to live, but what can push prices up is people are displaced and they need somewhere to live, so the demand goes up,” said Randall Bell, director of Landmark Research, which tracks economics issues.
In a foreshadowing of the fires’ vast impact, State Farm officials said that, as of Friday afternoon, they have received more than 2,100 homeowners insurance claims and more than 800 auto insurance claims related to the North Bay firestorms.
“It’s a mix, a wide range now,” said Chris Pilci, a State Farm spokesman. “It could be somebody who had damage from being on the fringes of the fire, or it could be a total loss. We anticipate the claim volume will continue to rise.”
Insurance agents have fanned out into the devastated region.
“The first few days, communication was very difficult in that area,” said Sevag Sarkissian, a State Farm spokesman. “It’s all hands on deck.”
The impact of the displaced residents could also ripple beyond the market for buying and selling houses.
“Apartment rents are definitely headed higher,” Nothaft said.