Housing Values in the Line of Fire

How California Wildfires Are Reshaping Real Estate: Risks, Trends, and Resilience

California has long grappled with the challenges posed by wildfires, but the last decade has marked a stark escalation in both frequency and intensity. Particularly between 2018 and 2021, the state witnessed some of its most destructive fire seasons in history. These disasters have reshaped the real estate landscape, with wildfire risk increasingly influencing property values and insurance availability. For homeowners and investors alike, the need to adapt and build resilience has never been more urgent.

Wildfire Trends and Their Growing Impact

Historically, proximity to wildfire-prone areas had minimal impact on home values, with buyers often prioritizing location and amenities over risk. However, as catastrophic wildfires have become more common, the dynamics have shifted. The Camp Fire of 2018, which devastated the town of Paradise, and the record-breaking Dixie Fire of 2021 are stark reminders of the destruction these events can bring.

From 2018 to 2021 alone, over 4 million acres burned annually, displacing thousands of residents and destroying billions of dollars in property. This unprecedented damage has heightened awareness of wildfire risks, leading to changes in both real estate valuations and insurance practices. Homebuyers now weigh fire-resilient features and mitigation measures more heavily, while insurers tighten coverage requirements or withdraw from high-risk markets altogether.

Housing Values in the Line of Fire

Wildfires not only threaten lives and property but also destabilize local real estate markets. Recent studies analyzing wildfire data, such as that from the Monitoring Trends in Burn Severity (MTBS) database, reveal a clear correlation between proximity to past fires and declining property values. The analysis focuses on single-family, owner-occupied homes and measures wildfire risk by calculating the average distance from a zip code’s center to nearby burn areas.

Key findings indicate that:

• Home values in areas within 3 miles of recent wildfire perimeters often see the sharpest declines.

• Properties further from burn zones fare better, but the perception of risk still influences buyer behavior.

• Over time, even regions once considered safe are subject to market hesitations due to the unpredictability of wildfire patterns.

The Ripple Effect on the Rental Market

Wildfires also disrupt the rental market, albeit in different ways. In the immediate aftermath of a major fire, rental demand typically surges as displaced residents seek temporary housing. This demand spike often drives up rental prices, making affordability a challenge for local tenants.

Long-term effects vary. In high-risk areas, sustained damage and reduced housing stock can keep rents elevated. Conversely, if a region becomes synonymous with wildfire danger, demand may plummet, leading to stagnation or declines in rental prices. Additionally, rising insurance premiums for property owners in fire-prone zones often translate into higher rents, further burdening tenants.

Insurance: A Partial Safety Net

Insurance plays a pivotal role in mitigating wildfire risk, but it’s not a perfect solution. California homeowners typically rely on private insurance or the state’s FAIR Plan, which provides coverage for those unable to secure traditional policies. However, the FAIR Plan comes with limitations: it’s more expensive, offers less comprehensive coverage, and primarily protects structures rather than personal belongings or additional living expenses.

In 2021, FAIR Plan policies accounted for just 3% of residential insurance statewide, yet they were disproportionately concentrated in high-risk areas. Despite the availability of these policies, research shows that insurance alone cannot fully offset the negative impact of wildfire proximity on home values. This underscores the importance of proactive mitigation efforts and smarter development strategies.

Lessons from the Past: Historical Context

Looking back, California’s most devastating fires have had profound and lasting effects on its housing market:

• The 2003 Cedar Fire in San Diego County destroyed over 2,200 homes and significantly impacted property values in affected areas for years.

• The 2017 Wine Country Fires in Northern California caused $9.4 billion in insured losses, reshaping perceptions of risk in Napa and Sonoma Counties.

• The Camp Fire of 2018, the deadliest in state history, virtually erased the town of Paradise, displacing over 50,000 residents and forcing a reevaluation of building codes and land use policies.

These events highlight the dual challenge of rebuilding devastated communities while preparing for future risks.

Building Resilience in the Real Estate Market

Addressing wildfire risk requires a multi-faceted approach that combines community planning, homeowner preparedness, and policy reform. Steps to strengthen resilience include:

• Fire-resistant construction: Incorporating materials like fireproof roofing and siding can reduce vulnerability. A notable example is actor Pierce Brosnan’s Malibu home, which survived the Woolsey Fire in 2018 due to its concrete structure and use of non-combustible materials. Similarly, Tom Hanks’ property emerged unscathed during the 2025 wildfires, largely thanks to meticulous planning, the use of fire-retardant landscaping, and advanced home hardening techniques.

• Defensible spaces: Clearing vegetation and maintaining fire breaks around homes helps slow the spread of flames. Singer Neil Young’s property, though partially affected, remained largely intact during the same fire due to extensive defensible space measures.

• Strategic zoning: Limiting development in high-risk areas minimizes exposure to wildfires.

• Enhanced insurance options: Expanding coverage availability and affordability ensures homeowners can recover after disasters.

Conclusion

As California continues to contend with the growing threat of wildfires, the real estate market must evolve to meet these challenges. By prioritizing safety, sustainability, and preparedness, homeowners, investors, and policymakers can work together to stabilize property values and protect communities. While the risks are undeniable, proactive measures offer a path forward, ensuring that California’s housing market remains resilient in the face of an uncertain future.