Since mid-February, over 80 listings for burned lots in Pacific Palisades and Altadena have appeared on the market following the devastating Los Angeles wildfires that took place in January, with land parcels fetching prices exceeding initial expectations.
The wildfires ravaged over 16,000 structures in total, which left homeowners to grapple with the choice to either rebuild with insurance money or sell.
Just last month, HousingWire reported that the first Altadena property destroyed by the Eaton Fire officially sold just days after hitting the market, as well as a Palisades lot.
According to the Wall Street Journal, land sellers are now asking for roughly the same value of their land’s estimated pre-fire valuation, following the rule of thumb that a land plot is worth between 40% and 60% of a property’s overall value in Los Angeles.
“While a few properties have closed, there was only one property, as of March 2, that closed escrow. Two hours ago, a second property just closed in the Palisades. Other than that, six others are in escrow, but nothing else is closed,” clarified Anthony Marguleas, CEO of Amalfi Estates.
“There also isn’t a mass exodus happening, either,” Marguleas continued, reflecting on previous wildfires that have caused many to reconsider their living situations. “A better question is really who’s not coming back? Two major groups aren’t coming back…25% of the Palisades is 65 years or older based on the recent U.S. census, so people that are in their 70s and 80s are most likely not going to rebuild their home.”
He continued, “The next group that won’t come back are those newer to the community [because] when something like this happens, they don’t want to wait three to five years to rebuild, they want to go back to their roots.”
Marguleas believes that based on the approximate 6,000 Palisades structures that burned, somewhere around 500 to 800 homes will be coming on the market.
“There are 10 buyers for every property that comes on the market, so the demand is 10 times what the supply is. So even though we’ve had 37 properties come on the market in the Palisades throughout the last two and a half weeks, there are 10 times that number of buyers wanting to buy them,” he said.
However, Marguleas pointed out that the Palisades market is an anomaly compared to others that have faced disaster. “If you asked anyone, ‘If you had the biggest fire in U.S. history, would profit values only drop 10%?’ You’d be like, there’s no way. And what’s even wilder is that the Palisades Riviera, which got least affected by the fires, actually appreciated 10% to 15% appreciated, which is wild to think that a neighborhood can appreciate when it’s in the Palisades and you have this huge fire and your whole community is gone, like there’s no there’s no banks, there’s no markets.”
With strong location desirability, neighborhood concerns about the rebuilding of Altadena and the Palisades are arising, with an “Altadena is not for sale” movement becoming a rallying cry throughout neighborhoods. Communities are also encouraging their neighbors not to sell to developers.
“Developers will come in and think they can make money. But there’s a misconception there as well, because property values have not dropped 30% to 50% like people expected, like they did in another fire,” Marguleas said “So how can developers make any money if property values have only dropped 10 to 20% but materials, lumber and labor, has gone up 50%?”
Selma Hepp, chief economist for CoreLogic, told HousingWire that in terms of the lot prices, data will lag due to closing times. “What we have seen, and this is not specific to the lots, is that median home prices in areas that are of similar neighborhood characteristics like the Palisades have seen a jump. Anecdotally, I have heard that lots are selling quickly at the premium,” she said.
Hepp also shared that the cost of land has increased at triple the pace since the onset of the pandemic, while home prices have gone up about 50%. “So, really it’s in the cost of land for these areas, and we think about the desirability and being that they’re in prime locations, it’s not unexpected that they would be selling at a premium,” she added.
The Palisades, Hepp says, has more desirability than other previously wildfire-stricken areas such as California’s Butte County or Placer County. “The market dynamics are very different,” she said. “On top of that, the Palisades and Altadena areas are very urban areas with access to jobs, access to schools, access to community stuff and so on so forth, so the demand will naturally be higher to remain in the area…So in that sense, I think the pace of turning over the parcels and the pace of trying to rebuild these homes is going to be faster.”
