The city is battling the worst fires it’s ever seen – and rebuilding destroyed neighborhoods could take years
The worst wildfires in Los Angeles’ history are continuing to wreak devastation across the city, causing at least five deaths and reducing entire neighborhoods to rubble.
While firefighters had some success repelling a blaze in the Hollywood Hills on Thursday, the two fires – one on the city’s western flank and the other in the east – remained largely uncontained.
Almost 180,000 people were ordered to evacuate their homes in recent days and over 400,000 Californians were left without power, with Los Angeles sheriff Robert Luna telling a news conference Thursday that further casualties are expected.
California fires live updates: A new wildfire breaks out in scrubland in Hollywood Hills, adding to five other blazes; Los Angeles officials, including Mayor Karen Bass, address resources for 'unprecedented event' https://t.co/02gTbWHvuL pic.twitter.com/HbhL063qSq
— Reuters (@Reuters) January 9, 2025
Amir Nurani (pictured below), a California-based broker with Left Coast Leaders who has clients in LA, said the full scale of the disaster would only become apparent in the weeks ahead, when the scores of homeowners who fled their properties finally return.
“That’s when we’ll understand the true devastation of how many people that we have one degree of separation with were impacted or lost their homes,” he told Mortgage Professional America.
Disaster raises fresh questions over California home insurance crisis
The news marks another grim development in the insurance crisis gripping California’s housing market. JP Morgan Insurance analysis suggested insured losses from the Palisades Fire in the west of the city could reach $20 billion – with many of the damaged and destroyed homes probably uninsured.
Morningstar DBRS, meanwhile, said the other wildfires currently torching LA could contribute to a further $8 billion insurance hit.
Anyone with a mortgage is required to have insurance on their home with most policies covering fire – but Nurani questioned whether insolvency issues at insurance companies could come to the fore because of the scale of the damage. “The claims are going to be astronomical, and through the roof,” he said. “Those are just the estimates right now – claims haven’t been processed yet. But I think the losses are going to be considerably higher than that.”
Last month, Matic chief executive officer and co-founder Ben Madick highlighted the upward pressure natural disasters were putting on California homeowners’ insurance premiums.
“The rising costs and more importantly, the limited availability of products in high-risk areas… throughout the state of California are impacted by the major losses from wildfires, as well as rising costs of materials and goods,” he told MPA.
Sluggish pace of construction could hinder city’s recovery
The path ahead even for those homeowners with insurance who’ll be able to have their homes rebuilt could be far from straightforward. California, like vast swaths of the country, has faced an acute homebuilding crisis in recent years, weighed down by labor shortages, high construction costs and regulatory hurdles – and that could put a significant dent in efforts to build back quickly.
“The question is: How fast are these homes going to be able to get built back up?” Nurani said. “That’s not going to be an overnight process, and that in itself is going to be a bottleneck in terms of what we see for a lot of these homes getting replaced.
“It could take a couple of years for all these homes to get fully built because if there’s nobody available to rebuild your home, what are you supposed to do other than just wait? I think that’s going to be a pressure point inside [LA’s] real estate economy and the surrounding area as well.”
A ‘truly heartbreaking’ disaster
Mortgage Bankers Association (MBA) president and chief executive officer Bob Broeksmit, meanwhile, extended sympathy to member companies and their employees, families and customers, and all those affected by the wildfires. He described the news as “truly heartbreaking” and said the association stood in solidarity with victims who had lost homes and possessions.
“MBA also thanks the first responders and volunteers who are working around the clock to protect lives and their communities,” Broeksmit said in a statement.
He highlighted that impacted homeowners’ first steps immediately after a disaster should include contacting their mortgage servicer and homeowners’ insurance company, and applying for Federal Emergency Management Agency (FEMA) disaster assistance.
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