Fire Fallout for Los Angeles

On January 7th, 80mph gusts blew through Los Angeles, causing massive fires in Pacific Palisades and Altadena. It caught major tailwinds and within 24 hours it was destroying thousands of homes, ransacking neighborhoods and local communities. The estimated financial destruction exceeds upwards of $100bn. Nearly 200,000 people have been displaced without knowing what’s next. Some have lost just about everything. It will take years to rebuild and the journey has yet to fully begin.

As the ashes have begun to settle, most of the displaced people are looking for goods just to fulfill their basic needs. They have been settling for any available temporary shelter to get by while looking for more permanent housing.

LA already has a housing shortage with high home prices and rents, due to extremely high demand and low supply. Now there are thousands of additional people searching to buy and rent, which is driving up pricing further. The city and state are trying to implement regulations to prevent pricing from going too high in the short term, but long term troubles remain.

Not all of the directly affected people have the means to replace the homes they lost. Some of these residents owned their homes for decades and it was all they had. With the structures gone, they are left with the ransacked land. The questions they are asking themselves are if they should consider rebuilding and returning back to their communities, or are they better off selling and moving on.

Some of the factors that will play into how they'll determine their decisions are:

1. Assuming an insurance policy was in place at the time of the fire, what will the payouts be from the claims? How much will they have to fight to get what is owed to them? Will these insurance companies be able to meet the total payout demand?

2. If they have a loan, are those lenders allowing for short term forbearance until these borrowers recover?

3. If they want to sell the land, will the insurance pay out + the land value meet the previous loan balance + money put into the home, or will these owners and the banks take massive losses?

4. If they want to rebuild, how long will it take to remediate the land, get permits, secure contractors, kickoff construction and finish building? What is the cost to do so and the major headaches associated with building near thousands of neighbors trying to do the same? Many of these owners are not developers so who will be there to help along the way to make sure they don't run into significant hurdles and cost overruns?

5. If they choose to rebuild, how long will it take the full community to return with restaurants serving food, grocery store shelves stocked, and people buzzing around the neighborhood?

We anticipate that the cost of materials will skyrocket, contractors will overcharge, and insurance companies may not write future policies in these areas. As a result, many who have lost their homes may not have the financial means to rebuild even with an insurance payout. Others who can afford to rebuild may choose to move on with their lives, and not deal with the stress of rebuilding.

2025 kicked off with many of us optimistic about the future. Right when we thought things were set to turnaround to launch us forward, we were met with one of the greatest natural disasters Los Angeles has faced. The true fallout has yet to hit, as we see how our city and the people in it begin to recover and rebuild.

Ultimately we are counting our blessings, as catastrophes like this put into perspective the things in life that are most important: our health and the wellbeing of the people closest to us.

If you have been impacted by the fires in one way or another, or want to chat for any reason please feel free to reach to out us.