The Cost of Wildfires: How the Pacific Palisades Tragedy Affects the Housing Market

The recent wildfires in Los Angeles' Pacific Palisades have wreaked havoc, leaving the community in ruins. As of January 14, 2025, the Palisades Fire has consumed over 23,700 acres and is only 17% contained. The inferno has led to at least 24 fatalities and the destruction of more than 5,300 structures, with economic losses estimated at approximately $250 billion.

This area, cherished by numerous celebrities such as Tom Hanks, Ben Affleck, Mark Hamill, Spencer Pratt, and Heidi Montag, has seen significant losses. On January 7, the fires destroyed the home of ABC News reporter Zohreen Shah, who had recently purchased her "dream home" in the Palisades. Other notable figures, including James Woods and Eugene Levy, were among the more than 30,000 residents forced to evacuate.

Despite the grim situation, the California Association of Realtors remains optimistic about the state's housing market, projecting growth in 2025. Their report forecasts a 10.5% rise in single-family home sales and a 4.6% increase in median home prices.

However, living and selling properties in wildfire-prone regions like this come with unique obstacles. For potential buyers, disasters such as the Pacific Palisades fire can overshadow the allure of these highly sought-after neighborhoods.

A Growing Desire to Relocate from Fire Zones

With wildfires raging across the country, it's no surprise that many homeowners in high-risk areas are looking to move. In 2024, over 62,000 wildfires burned through approximately 8.8 million acres nationwide, according to the Global Fire Monitoring Center.

"This is below the 10-year average for the number of wildfires, but notably higher than the average for acres burned—by nearly 2 million acres," notes the report.

California alone saw over 1 million acres consumed by wildfires in 2024, and the year 2025 has started on a similarly tragic note. Despite this, strong demand in specific areas means there is still hope for sellers. By leveraging tools like fire maps and investing in fire-resilient property upgrades, buyers may see value despite the risks.

"For many buyers, especially in high-demand areas like Malibu, the risks are weighed against lifestyle benefits," says Daniel Cabrera, CEO of Fire Damage House Buyer. Cabrera highlights that while higher insurance premiums and potential fire risks deter some buyers, others remain willing to pay top dollar for location and luxury.

"It's often about educating buyers on risk mitigation strategies, like home-hardening and fire-resistant landscaping," he explains.

Selling Properties in Fire Zones: Challenges and Solutions

Selling a home in a fire-prone area presents significant hurdles. Declining property values, soaring insurance premiums, and the ever-present risk of total loss make many potential buyers hesitant.

"Homes in fire zones can scare off some buyers like me because of all the risks and unknowns," says Charissa Bright, owner of Georgia-based Bright Buys Houses. "Places like Malibu, CA, still draw people willing to pay extra for the lifestyle."

She notes that some real estate agents may avoid marketing such properties due to reduced buyer interest, strict lending conditions, and the requirement to disclose fire hazards. In California, sellers are legally obligated to inform buyers if a property lies within a "very high fire hazard severity zone," as outlined by Max Dugan-Knight, a climate data scientist at Deep Sky.

"This requirement will make selling homes in these areas more difficult, especially as a buyer may struggle to secure home insurance," says Dugan-Knight. He adds that banks may also hesitate to approve mortgages for homes with significant fire risks.

Wildfire Risk Across the Nation

Western states dominate the list of regions with the highest wildfire risks, with California leading the charge. According to CoreLogic, 10 of the top 15 metro areas facing severe wildfire threats are in California.

In 2024, an estimated 5.5% of homes nationwide were classified as being at severe or extreme wildfire risk, as reported by the Realtor® 2024 Climate Report. Of these, 39.1% were located in California, amounting to $1.7 trillion worth of property.

Los Angeles holds the highest total value of homes at risk, while Colorado Springs, CO, ranks highest for the percentage of property value exposed to wildfires. Despite these statistics, buyers remain drawn to these areas due to their amenities and affordability compared to other high-demand markets.

What Buyers and Sellers Need to Know

Even in fire-prone regions, demand for homes persists. Many homeowners in high-risk areas aim to sell to avoid future wildfire-related expenses. As Hannah Jones, a senior economic research analyst at Realtor.com, explains, "Both of these forces may contribute to homes being more affordable in wildfire-prone areas."

Interestingly, data also reveals that home prices in high-risk zones have increased faster than in lower-risk areas, likely driven by the relative affordability of these properties.

The key takeaway for both buyers and sellers? Research thoroughly.

For sellers, understanding their property's fire risk can help them better prepare for the market. For buyers, tools like Realtor.com's wildfire risk information can provide detailed insights into a property's risk level, including an interactive map and a 30-year fire factor rating.

Tools for Navigating Fire Risks

Technology and resources are increasingly helping buyers and sellers assess fire zones effectively. Realtor.com, for example, offers wildfire risk data powered by the U.S. Forest Service and other agencies, helping users compare risks at the county and national levels.

Experts like Bright also recommend consulting local zoning offices and hiring inspectors familiar with fire safety to ensure a property is adequately protected.

Navigating a Fiery Future

As wildfires become a recurring crisis, residents and prospective homeowners must adapt to a new reality. From implementing preventive measures to weighing risks against benefits, the journey of owning property in fire-prone regions is increasingly complex. However, the resilience of the housing market and the determination of communities to rebuild provide a glimmer of hope amid the flames.

Finally, in light of the recent Pacific Palisades tragedy, it’s a stark reminder of the importance of community solidarity and proactive planning in the face of natural disasters. While the devastation is heartbreaking, efforts like the REALTORS® Relief Foundation and local rebuilding initiatives showcase the strength and resilience of affected communities. These tragedies highlight the urgency of finding sustainable ways to live in harmony with the environment, ensuring that future generations can safely call these areas home.

In the end, whether buying or selling in high-risk areas, diligent research and proactive measures are essential. By staying informed and prepared, homeowners and communities can navigate the challenges of living in wildfire-prone regions with strength and hope.