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Natural Disasters Increase Home Value in Adjacent Communities

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Thursday October 8, 2020
Natural Disasters Increase Home Value in Adjacent Communities

In California, Dante’s Inferno-esque wildfires are just a part of life; in recent years these fires have set new records in terms of how destructive they are. Oddly, these fires appear to be driving housing prices up in areas that have been devastated by fires. While it is upsetting from an equitable perspective, the fact remains that people whose homes have burned down still need a place to live. As people seek homes in areas that aren’t likely to experience significant wild-fire damage, the net effect is to exacerbate the issues of an already dangerously low inventory. When demand is up, and supply is down, prices go up.

The median home price in Napa County set a new record in September 2020, increasing by 30.1% from the previous year to roughly $1.3M; home sales increased by 40% year-over-year. In Sonoma County, the median price increased by 7.7% to about $810k; this is despite the massive fire that ravaged the county in August 2020; home sales increased by 53.1% year-over-year. It is rather common to see what is referred to as “price gouging” in disaster-adjacent communities. Of course, most analysts acknowledge that as fires become more likely in certain areas, housing prices will decrease.

This information can be used to your benefit as a potential seller, if you live in an area near the location of a disaster but were unaffected by it. While we don’t condone price gouging, certain schools of economic thought suggest that increased cost is precisely what should happen when demand is up and supply is down; why those things occurred is irrelevant and morality should play no part in economic decisions. Ultimately, it is up to each individual seller to decide what they are comfortable with, but the bottom line is the value of your home will increase significantly under these circumstances.

At the Chernov Team we understand that knowledge is power, and knowledge of how housing prices are impacted by these all-to-common wildfires is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with he most, and the Chernov Team always leaves the table with the most.

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