Wildfires fuel a perfect storm
California wildfires are becoming more intense and frequent, leaving homeowners in fire-prone areas to grapple with devastating losses. In 2024 alone, more than 8,000 wildfires burned over 1 million acres statewide, according to CAL FIRE, destroying over 1,700 structures.
Now come the Palisades and Eaton fires, causing destruction that has displaced thousands of residents, many of whom are competing for housing in a nearly air-tight market.
Altman’s estimate of roughly 1,000 new renters and buyers has only worsened the demand-supply imbalance. Landlords and sellers are taking advantage, with some allegedly increasing rental prices by as much as 77%.
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Explore better ratesA fire insurance crisis
The cost of fire insurance is skyrocketing too. Insurers, scarred by $67 billion in insured wildfire losses since 2017, are pulling back from high-risk areas or raising premiums to unprecedented levels.
According to Insurance Journal, State Farm, California's largest insurer, recently requested a 30% rate increase for homeowners insurance, with Allstate seeking an average 34% rise.
As a result, buyers are being priced out and current homeowners are left scrambling to find affordable coverage or risk going uninsured. Without insurance, homeowners face the harsh reality of rebuilding after a disaster without coverage, which could lead to financial ruin.
What’s happening to the LA housing market?
Even before the newest wildfires, LA already had a housing problem, with Redfin reporting the median home price reaching $1 million in late 2024.
Now, bidding wars are becoming more frequent, and some renters and buyers are finding themselves priced out altogether.
On the supply side, fewer homes are available and therefore fewer are being listed for sale. Meanwhile, some landlords are raising rents dramatically to cover their increased insurance premiums.
For those hoping to rebuild, the road is long and costly.
For instance, Altman suggested a typical single family home in the Palisades community could take three years to complete. And the California Department of General Services (DGS) shows that construction costs were already surging before the latest fires, with costs only increasing.
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One potential silver lining is the push for smarter urban planning.
According to Business Insider, fire mitigation experts suggest building out more buffer zones between high-risk areas and residential neighborhoods to reduce wildfire damage and building denser housing in safer areas to alleviate the housing crunch.
These measures, however, could take years to implement and may face political and financial hurdles.
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