I received an email earlier in the week in which someone planning a move to San Diego apologetically asked the following:
I hope that this doesn’t seem callous in light of the recent events in the San Diego area, but my family may be moving there in March and are wondering what effect the fires might have on real estate values in San Diego County. Will the coming year be a bad time to move to the area, or might it be prime?
This is, not surprisingly, a question I have been asked at least a half-dozen times since the smoke began dissipating. A few asked simply out of curiosity, while others asked in the context of “might I benefit?” At first blush, one might instinctively find the latter lacking compassion. If we are honest, however, most of us who care about the real estate market, either because it is how we make a living or because we are currently seeking to buy or sell a home, will have to admit that the question has crossed our minds.
I do not for a moment believe that the seller who asked if the destruction of so many homes might positively affect his market value was taking joy in his perceived potential to profit from the misfortune of others. On the contrary, a real estate market is influenced by a myriad of complex factors, both internal and external. It is a valid question.
My short answer is no, the fires will not have a measurable effect on demand or pricing. The longer answer requires a caveat. Based on our experiences with the 2003 fires in Scripps Ranch, there is the potential for short-term localized blips in the demand radar. Of course, property loss then was not so widespread. With nearly 400 homes lost in Scripps Ranch, we saw an immediate and significant demand for rental properties. In addition, with many of the affected families being what most would consider more affluent, we also saw an increase in buyer demand. Many families chose to purchase a home rather than rent while undergoing the long process of rebuilding.
Markets in surrounding communities saw little impact. People will tend to want to stay close to “home” in the aftermath, in the areas where their children attend schools, where they are familiar with the services, and so forth. There is a comfort zone beyond which few will wish to venture.
It is important to remember too that what we experienced in the aftermath of the 2003 Cedar Fire occurred in a different real estate climate. On October 29, 2003, we had 25 active listings in Scripps Ranch with an average market time of fewer than 30 days (according to the Sandicor Multiple Listing Service). This morning, we have 126 homes listed for sale with an average market time of nearly 70 days. Four years ago, we were in the crazy days of real estate. You couldn’t list them fast enough, and prices were increasing dramatically. Purchasing for the short-term and as an interim measure was perceived as a good investment. Today, that is not the case.
I am aware of reports that there is huge immediate demand for rentals in the areas hardest hit, such as Rancho Bernardo. This is as expected. I have not seen this same clamor in nearby Scripps Ranch. While enormously tragic for each family affected, the loss of housing on the larger, impersonal scale does not constitute a significant subset of the county-wide housing inventory. So, the question of whether it is a good or bad time to move becomes one of general market environment. For a buyer, and from strictly a pricing standpoint, there hasn’t been a better time to purchase a home in San Diego in the past four years. Will prices go lower yet? Perhaps, and probably. But, if you are purchasing for the long-haul and not as an interim strategy or purely for short-term investment and gain, you should have nothing to fear from buying now.