The fires that have swept the region, and that still burn in some places, have been incredibly dramatic in their impact on the day-to-day functioning of our city and have been absolutely devastating to those families who lost their homes. But when people have asked me in recent days how I thought the fires would impact home prices, my answer has been that it wouldn’t have much effect at all.
It’s simply a matter of scale. San Diego is a huge city and — without minimizing the catastrophic impact to those involved — the number of homes destroyed represents an extremely small portion of our housing stock.
The latest estimate I’ve gotten from the U-T’s fire blog as I write this is that 1,470 homes have been destroyed. According to SANDAG, 1,470 homes represents just .13 percent of San Diego’s total housing supply. I imagine most of the homes burned were single family homes, but even still, the number of homes destroyed accounts for just .22 percent of all single family homes in San Diego.
Of course, pricing impact would result more from changes in for-sale inventory than in the overall housing stock. Here too, though, the fire’s impact is minimal. If immediately replaced from resale inventory, the homes destroyed would in their entirety use up just 11.1 percent of single family homes currently listed for sale. This would just get the amount of inventory back to where it was in May — not a signifcant change and not anything that would change the market’s prevailing trend.
It’s instructive to look at how the loss of these houses would change the relationship between supply and demand. In September, there were 12.2 months worth of single family homes listed for resale. This means that at last month’s pace of sales, it would have taken 12.2 months for every home to be purchased. An immediate removal of 1,470 homes from the inventory would reduce the amount of inventory to 10.8 months — still quite a bit worse than anything we’ve seen in years. The difference between 12.2 months worth of inventory and 10.8 months simply doesn’t amount to much. Both figures are ominous for pricing; one is just slightly less so.
If 1470 homes = .22% of all
If 1470 homes = .22% of all single family homes in SD, that means there are about 668,000 sf homes in SD. And if 1470 = 11.1% of sf homes for sale, that means there are about 13,000 sf homes for sale. So about 2% of sf homes in SD are for sale.
If, of the homes that were lost, the same percentage were listed for sale as were listed for sale in the city as a whole, then 29 of them would’ve been listed for sale. Which moves the months of inventory number from 12.2 months to 12.0 months.
Quick and dirty on a break at work, but it seems about right.
Buyer sentiment –
In LA
Buyer sentiment –
In LA before/during the last downturn, it seemed as though pestilence was being heaped upon it – fires, earthquakes, heavy rains, riots. I think this was a psychological contributor to the population exodus (couldn’t rent a Uhaul as they were all in use by people leaving town).
Only time will tell if this has a negative effect on population. The fires 3 years ago in SD didn’t seem to.
But, an every-3-year mass fire can’t be good. Lot’s of people are leaving because they can’t afford to live here. If there are many on the fence, the fires will only encourage the undecided to perhaps move on.
These factors are hard or impossible to quantify. They are intangible, but can have an effect.
HiggyBaby
The fires will give out of
The fires will give out of work/slow contractors the shot at some work. This will help unemployment, and that’s good. But all in all, nothing’s going to stop the train.
I wonder what, if any,
I wonder what, if any, impact this will have on regional and local desirability. Will this make coastal areas even more desirable as they were not seriously threatened? Will this have impact on the folks’ desire/willingness to move to Southern California in general and San Diego in particular?