How will wildfires affect real estate?
HOW BAD WAS THE Marshall Fire?
On December 30, 2021, the communities of Louisville and Superior, Colorado lost 1,084 homes and 127 structures. The fire took approximately 6 hours, was fueled as high as 105 MPH winds and may impact the rental market for the next two years and the real estate market for the next ten years. It is estimated the fire will cost between $819 million and $1.6 billion in home losses and is the tenth most expensive fire in US history. While the spread of the fire can be attributed to the high winds and the extreme drought conditions, it is believed the fire was man made. Locals refer to this event as the Marshall fire, while out of staters have been calling it the Boulder fire- even though Boulder as a city was spared.
Will the Marshall Fire impact real estate?
Erin and James have different thoughts on how the real estate market will be impacted by the Marshall Fire.
Erin believes the Marshall Fire will impact the real estate market because there are now 1,000 displaced families that need homes and 1,000 fewer homes to live in. Because the Denver metro market has been experiencing supply and demand problems since 2013, with each year getting worse, Erin feels this may result in even more intense bidding wars, appraisal gap coverage and above asking offers.
James feels the Marshall Fire will not affect the housing market because Denver Metro had previously been getting around 35,000 new residents each year, so a surplus of 1,000 is insignificant. Added to that, many of the Marshall fire refugees will rebuild, buy at different times throughout the course of the year or move away from the location.
Regardless, with new builds taking between 8-10 months to complete because of labor and material supply chain issues, it may take as long as 10 years for the community to correct for the massive loss of local housing.
Will the Marshall Fire impact rental costs?
Erin and James agree that the Marshall fire will impact the rental market. The Colorado Attorney General, Phil Weiser, shares their concern and sent letters to major online rental platforms (Airbnb, Zillow, VRBO and REColorado) about illegal price gouging.
It has been reported (although not verified) that State Farm is offering to pay up to $400/month more than the market rental rate and pay 6 months of future rents when a lease is signed. While this is great for people with State Farm Insurance, it will likely cause issues for the person that wants to rent in the area but was not affected by the fire.
It is estimated the Marshall fire will impact the rental market for at least two years.
Note: This is an overview of our January 25th podcast episode. If you would rather listen to this content, you can find it here: How the Marshall Fire Will Impact the Denver Metro Real Estate Market + How to Read Your Insurance Docs.