The sheer resilience displayed by the Wine Country community following last week’s raging wildfires is a reason to be optimistic about their recovery, yet before we can help build towards a brighter future, we must first look to the past. Prior to the Wine Country Wildfires, the Bay Area’s deadliest wildfire occurred in Oakland Hills in October of 1991, and many lessons can be learned from that experience.
Shedding light on the matter is Partners Trust’s Chief Economist and Vice President of Business Intelligence, Selma Hepp, whose latest Economic Straight Talk addresses the larger implications that California wildfires have on the area’s affected and overall housing market.
Assessing The Damage
Although information continues to pour in and be processed, CAL FIRE estimates that 12 large wildfires have rampaged through California over the past 10 days, killing 41 people, burning more than 245,000 acres, and destroying an estimated 5,700 structures. The Wine Country Wildfires are estimated to have destroyed about 2,800 homes so far—or about 5 percent of Santa Rosa’s housing inventory—with current property damage approaching $4 billion.
History Repeats Itself
Wildfires are a harsh reality of living in California and historically, six of California’s seven most destructive wildfires have happened in October. So what have past fires taught us about rebuilding and managing our own expectations? The rebuilding process in Oakland of 1991 began about six months after the fires while recovery took about four years. However, not all units were rebuilt, and some of those residents who did return decided to build larger homes, which lead to higher-priced neighborhoods (median home value of about $300,000 in the early 1990s to $700,000).
Wine Country Resident Profile
Sonoma and Napa counties are some of the most desirable locations to live in the state. That said, the persistent demand over the years has shown that people are often willing to take a risk to live in a beautiful location, even if the property insurance comes at a higher cost. For-sale inventory is extremely low and new construction is insufficient to meet buyer demand, so there will only be further pressure on prices and rents in the coming years.
There are definitely more willing buyers than available homes in the Wine Country. Looking at the current rate of new construction of 1,200 new housing units built in Sonoma County per year, it would take about 2.5 years to replace the 2,800 properties that have been destroyed by the wildfires. If we learned anything from the Oakland fires of 1991 it’s that streamlining the building-permit process for fire victims is crucial for the region’s full recovery.