Historically, the occurrence of wildfires has dampened home-value appreciation in the immediate area of the fire. This holds true even in neighborhoods with no evacuations or property damage. However, the 2018 wildfire season appears to be a different case entirely.
According to a new study released by University of Las Vegas (UNLV) researchers, demand for real estate in high-risk areas is likely to fully rebound within as little as a year. The research team evaluated changes in real estate prices before and after wildfires in high-risk and low-risk zones. Next, they used 3D modeling to factor in whether homeowners could see the fires, how burn scars would affect their views, and how their home’s elevation and forest density might affect their line of sight.
UNLV research economist Shawn McCoy believes this research shows that wildfires do not lead homebuyers to believe they’re at risk.
McCoy worked with University of Pittsburgh research scientist Randy Walsh on the study, which took place in Colorado. Both scientists believe the results are applicable in California as well.
When the View is Worth the Risk
The study indicates homebuyers place a huge premium on homes with appealing views. This creates multiple potential problems in terms of dealing with wildfires:
- Developers tend to leave dense forest intact around housing units to add value.
- Homeowners are unlikely to take preventive actions against a fire because it doesn’t feel like a risk to them.
- More homes will be built in the “wildland-urban interface” (WUI)—high-risk areas where dense vegetation meets residential development.
“To the extent that homeowners value the environmental amenities in these high-risk areas, if the market participants systematically underestimate the likelihood of a fire, we may observe inefficiently increased rates of housing developments in forested areas as well as a potential decrease in the willingness among existing homeowners to take steps needed to prevent fire from impacting their homes,” McCoy warned.
He added, “A lot of recent work shows that wildfires are not just a result of changes in global climate, but also rapid housing development into forested lands.”
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