Fires and fallout

Good morning. We've had a few requests for a post on the fires, so here it is. Our first thought is probably yours as well: We're hoping for the best -- minimal loss of life, and minimal damage to property.

Though we are hesitant to go straight into an economic discussion of such a disaster, this is an economic blog and we sense some interest.

Random thoughts: It is possible the fires will cause a slight, temporary change in the supply-demand dynamic in Southern California real estate  -- that is, marginally more demand, marginally less supply. At present there are 157,000 homes for sale in the five counties most affected (Inventory levels from Bubble Markets Inventory Tracking: Riverside, 32,000; Los Angeles, 59,000; San Bernardino, 23,000; Orange, 20,000; San Diego, 23,000).  In those five counties, sales last month totaled 11,800 homes.  Remember, not everyone who loses a home will run out and buy one; and not everyone who loses a home will stay in the area; some of the burning homes are vacant. Another caveat: Throughout the affected areas, the fires will cause a temporary freeze on all home sales activity -- very few people will go to open houses this weekend in the affected areas.

Economic impact: Generally speaking, quick natural disasters cause a short-term increase in economic activity. People flock to Home Depot and Wal-Mart to buy emergency supplies, the government spends a lot of money, insurance claims are paid out, houses and businesses are rebuilt. That said, Gov. Arnold Schwarzenegger is warning that this disaster will cost the state some economic activity.

Big-picture longer term fallout: It's possible the fires will represent a "tipping point" of sorts that will cause governments to pause and reconsider the wisdom of heavy development in dry, fire-prone areas in the Southwest. We consider this unlikely -- central planning and decision-making are not big factors in the American economy.  An event of this magnitude, though, could make it more expensive, and thus less attractive, to build in fire zones -- through higher insurance premiums.

Your thoughts? Insights? E-mail story tips to lalandblog@yahoo.com
Photo Credit: Los Angeles Times

Comments

[brettdl]

I was wondering if you thought the fires might push more people to leave the area and thereby further increase the housing glut in the long run.

[FM71]

Just when the housing inventory goes up and the future starts looking bright for buyers our annual wildfires bring them right back down. Anyone interested in a fire sale? A co-worker of mine thinks that the fires were started by sub-prime borrowers. Hmmmm.......

[Steve]

As seen in New Orleans and Miss nothing will change as far as building. Insurance rates will go up and that is about it. This is an annual event in SoCal with the Santa Ana's and nothing will change. Like the Northridge Quake it will most likely help the economy for a period of time.

[Cal]

I think it would change the local rental dynamic for a time. But would depress housing sales in areas near burned out areas and could be the straw that broke the camels back for the areas immediately surrounded by burned out brush (harder for buyers to imagine themselves in the homes, mudslide worries, fire danger is evident to buyers, etc).

[Rpche]

There are 157,000 homes for sale in those areas. The number of homes burned down doesn't even represent a rounding error.

The economic impact, if any, will not come from supply/demand but rather from an appraisal/financing point of view. If a house has a pile of ashes next door, does it appraise for more or less? Will banks be more or less willing to provide credit to fire-prone areas?

[David]

The fires will probably put more demand on rentals than sales in the affected areas.

People will be looking for short-term leases while their homes are rebuilt from insurance funds. Fortunately, there are many empty homes and condos sitting around for them to choose from, especially down in San Diego. If I were a flipper sitting on empty homes, I'd take it off the market and offer it for short-term (3-6 month) leases, and put them back on the market again for the Spring selling season.

[Pete Viles]

Mike posted this comment on another post, but it belongs here, so I'm reposting:

from Mike: i thought about the fire thing. i think it is going to stimulate some more economy here with home [re]building. i also think that many of these people will take a payout from their insurance and move to the urban areas where devistation is less likely. (you can just get shot more easily). there should be plenty of houses to rent left in the burn areas. shouldn't there? i think all the homeowner insurance premiums will spike and we will ultimatly pay for their burned houses in one way or another.

[are they crazy]

Not sure what the impact will be. It depends on how the insurance plays out. I suspect insurance companies will try to low ball using the declining market as an excuse. Also, I think anyone who is already upside down or heloced to the max is screwed. What I'm most shocked by is all the political discourse comparing this to Katrina, discussing whether people should be living there, and worrying about what this will cost everyone else. America used to be known for how we responded to disaster - just everyone pitching in the help one another and leave the discussion for later. It's a shame what's happened to us - we've lost all sense of humanity and any sense of caring about the greater good.

[Cal]

http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=aIOpZROwhvNI

"Home Insurers' Secret Tactics Cheat Fire Victims, Hike Profits "

"Insurers often pay 30-60 percent of the cost of rebuilding a damaged home -- even when carriers assure homeowners they're fully covered, thousands of complaints with state insurance departments and civil court cases show. "

[Josh]

It will be interesting is to see the fight between the insurance companies and the home owners over how much the home was worth when it burned down considering the current state of the housing market.....let the lawsuits begin!

[Toby]

It's like 1994 all over again.

Fires depresses demand much like ALL natural disasters . Because what it does is remind the potential buyer of the "other" costs in home ownership.

Like regional disaster insurance (here in LA it's earthquake and fire, in Folrida it's Hurricane, in Kansas it's tornado...and so on and so forth).

Again it goes back to that old adage, Just because you can afford the mortgage, doesn't mean you can afford the house.

I've said it here a ton of times--and probably going to say it a ton of times more...

Just wait until an earthquake. A good 5 plus in the city (It's not a matter of IF but WHEN).

Then you will see how low LA property can go. Try .40 to .50 cents on the dollar at current prices. And if it's a 6 plus, .25 to .35 cents on the dollar.

Mark my words. I've been through this sooooo many times before here.

It will happen.

[Toby]

" i think it is going to stimulate some more economy here with home [re]building. i also think that many of these people will take a payout from their insurance and move to the urban areas where devistation is less likely. "

One word: Quackenbush

And even if people do get SOME money, it wont be for at least 5 years. Anything between then and now will be done "out of pocket".

But to think any aid will be done better than, let's say, New Orleans, is just pie in the sky.

Even if you are totally covered and properly insuranced, your insurance company will fight you on EVERY turn. And the said part is...

At BEST, you will only get a franction of what you lost. And you lose all of those old family pictures...

Really, you get victimized twice.

[D]

This really is a horrible, horrible blog to read.

[ProblemWithCaring]

I love this blog.

We didnt start the fire....

[Toby]

This really is a horrible, horrible blog to read.

Posted by: D

No, what's horrible is that we don't have our National Guard here to help us in this disaster.

But this blog isn't about this stupid, horrible, @#$%^%ing war.

It's about real estate economics. And this fire is having a BIG impact on real estate economics (and the risk of home ownership).

I would be SHOCKED if this blog entry wasn't here.

[investorguy]

Toby: you're an idiot. RE rebounded fast from Northridge.

[Tex]

I'm surprised nobody's commented yet on the LA Times story about the first-time homebuyers who are defying evacuation orders and staying behind to protect their house.

http://www.latimes.com/news/local/la-me-
standoff23oct23,0,1933928.story

Losing your house is rough, but these folks need to get their priorities straight...

I think that all of these fires will speed the decrease in housing prices. I doubt people who lost everything and who are fighting with insurance companies to recover a small fraction of their loss are going to be in a position financially to play inflated prices for new homes.

[ProblemWithCaring]

inverstorguy is baaaaack! woohoo!

Finally! a break from the mundane sort of lunacy that is AnnS interpreting clearly written posts through foggy geriatric glasses of curmudgeonliness and Kim’s pretty tired racist-shtick - to get back to plain old, salt-of-the-earth blog trolling.

I wonder if we can thank his getting the Fannie Mae re-fi from Countrywide (on some of those flips for which he's claiming primary residency) - for his return?

[mike]

toby convienantly omitted the part of my blog that says we will all ultimatly pay for this damage through higher premiums.

do you know what omitted means toby?...........or did you just leave that part out

[mike]

i got some good deals after the earthquake. just go spend one winter in north dakota and you will see why people pay the price of a mortgage just to rent here. a lot more people perish from freezing than burning or shaking to death.

p.s. toby...you are a fool

[Anonymous]

Investorguy --

It is odd that you are so successful yet still feel the need to hurl epithets at those who disagree with you. Maybe not odd, but certainly sad.

You appear to represent the classic paradigm of the overconfident, undereducated investor. You believe that because you have seen 1000 white swans that you can prove that no black swans exist.

It is foolish to think that your investments are immune to major disasters or negative macroeconomic developments. Maybe you didn't live through the Great Depression, but still, all the data will show you that a lot of people lost a lot of money in real estate during that era. If you think a very large earthquake (say 7.5 or 8) centered in the LA basin wouldn't be catastrophic for local real estate values, you are almost certainly mistaken. If a nuclear weapon exploded in midtown Manhattan, our entire economy and all of your real estate investments across the country would fall off a cliff, I can assure you.

A whole host of lifelong real estate developers (me included) know that real estate markets are prone to boom and bust, and you don't have to be a 'whiner' to understand this. It is a natural cycle driven by the need for those employed in the industry to find any way (fraud included) to keep making money until everything is overvalued and the bubble pops. We are almost certainly entering the bust part of the cycle. I doubt values will fall 40%, but then again, if there is a black swan event, they may fall much more than 40%.

By the way, you should also consider that, in any event, the stock markets have handily beaten (in real dollar terms) most real estate investments during most periods of this country's history; this unfortunate fact tempers me from trumpeting my own successes in real estate.

Facts and logic are not your exclusive domain. In fact, they often seem to bypass you entirely if your posts are any indication. You ought to consider the limits of your own knowledge before posting again. Perhaps pick up a book on epistemology instead. It couldn't hurt.

[investorguy]

Aw shucks, Problem... no such luck, sport. I've been busy making money. What have you been up to?

Mike: no shit. I spent three years in ND.

[AnnS]

"AnnS interpreting clearly written posts through foggy geriatric glasses of curmudgeonliness
Posted by: ProblemWithCaring

And you are a complete MORON!! Let's see what did you object to?

(1) The breakdown of the economic demographics of LA county and comparison to the current lending standards of 20% down and the old 28/36 ratios in terms of the buyer market profile?

(2) The explanation that bankruptcy impairs the ability to get credit at favorable rates?

(3) The explanation of how the affordable housing programs operated through the ageis of the State Housing Authorities and HUD work

Or are you just a worthless misogynistic fool who hates it when women know more about numbers, economics and law than you, eh? (And I am properly younger than you since we got to retire very very early – you can do that when you have lots and lots of advanced degrees from prestigious schools.)

Hey Peter, what happened to your rule about not allowing personal attacks and insults in posts ? What, is this nitwit ProblemWithCaring your cousin or something?

He/she/it certainly never has substantive info to add to any discussion - just rudeness.

On the subject of what an insurer will or will not pay for a house that was destroyed, forget "market value." What a house may or may not sell for on a given day has nothing to do with what it is insured for or how much the insurer will pay.

Policies are written basically one of 2 ways:

(1) The property is insured for a fixed amount - generally what you paid for it on the day you bought it. If it goes up in value or in replacement cost, it was up to the honeowner to contact their insurance agent and raise the amount for which it is insured. (And no, insurers do check on how much you want to insure for versus the number it would take to rebuild it or buy a similar home. They aren't going to let you insure that 2 bdr/1 bath 700 sq ft house for $ 4 million.) If the homeowner had a fixed coverage policy for a definti amount - $100,000, $275,000, etc - that is the maximum the insurer will pay regardless of whether it will take 3 times that to replace the house because of an increase in construction costs or materials. If the homeowner didn't keep the coverage amount current with what it would take to rebuild, that is their problem to come up with the difference.

(2) The other is "replacement cost" which can be insured 2 ways.
(a) When the home is purchased, it is insured for the estimated amount that it would take to replace it. Typically this is done by a simplistic multiplying the sq ft by a number (nationally insurers are fond of using $100 - 200 per sq ft as an estimator.) Again, it is up to the homeowner to increase the amount of coverage if replacement costs go up or they add a few thousand in improvements. This method is typically used with older homes to arrive at a replacement cost separate from the land.
(b) Straight replacement usually written as “insured for $XXXX or the actual cost of replacing the structure.” While that is the best policy from a consumer point of view since they don’t have to keep increasing coverage and hoping their guess was right, it is also the most open to future fights with the insurance company. Homeowner defines “tile” as hand painted tiles at $50 apiece and the insurer defines “tile” as generic at $5 each from the discount lumberyard. Homeowner claims that the tiles in the house that burned were the $50 per kind, the insurer says “prove it” and the homeowner doesn’t have the receipts for the tile or even know who installed them since they were there when he bought the place. – and, of course, there are no pictures of videos of the house.

[Larry Kaplan]

The real estate market collapsed in the early to mid 90's because the economy tanked and the region had been overbuilt in the late 80's and early 90's. The earthquake and riots were not significant events in terms of real estate values, although they were very important for many other reasons.

[marycrobinson]

I watched canyon fires in the 70's and houses were not burned because people were smart enough not to build in areas that were notorious for semi annual fires!! Now with all the extra homes and landscaping the fires have more fuel to make a bigger problem!! People who build in the same area will get the same result - THINK it through!!!!

[Cal]

Posted by: Anonymous | October 23, 2007 at 07:23 PM

A thing of beauty..

[investorguy]

Anonymous: yawn. Buh-bye.

[Inland Empire]

Wow!! All the flames are not just in the fires!

[marvabhor]

As of yesterday WAMU stopped all fundings of pending home loan application in LA, Riverside and San Diego county due to the fires "until further notice". My guess is they are probably waiting to see how much of a dip home values will take after the fires are through.

[Brian]

Steve and some of the other posters are right. The fires will have practically no effect, beyond the short term. These are million dollar homes that are burning. The glut in the housing market is almost all in the low price end, that is why median prices initially went up as sales went down. The millionaires are not going to take their insurance payouts and buy a starter home. They will almost surely rebuild in the canyons they love.

[xtine]

Peter - I understand you only moderate to avoid expletives and the like, but the flaming and disrespect are getting, well, boring.
Is it in your plan to curb it? Or because it is not LA Times policy to refuse publication of anything that is not foul language or solicitation, are you going to continue to "print" the personal attacks?
What is your policy at this point?

[Rich]

For a bit of perspective, and insurance industry guy was interviewed on msnbc last night and indicated that the losses from hurricanes are always more severe than from wildfires and that Katrina's losses would still be 10 times those of this fire no matter how bad it gets. He indicated that these losses should not be severe enough to discourage insurers from staying in California and that the industry has made enough money off California in recent years to absorb these losses with no problem for their bottom line. So remember that when the speculation starts; in the great scheme of things this event is not likely to have a massive economic impact on either California or the country...

[Toby]

Toby: you're an idiot. RE rebounded fast from Northridge.

Posted by: investorguy

Umm, No it didn't. Northridge was the beginning of the biggest real estate down turn in SoCal's history (well up until this one I would guess).

Remember, before the earthquake, there was big fires, a huge riot and massive job loses in Aerospace, Long Beach lost it's military base...

It was a killing field BEFORE the earthquake. Then after the 10 freeway fell and the 5 and the 14 due to Northridge, the city was literally paralyzed....for almost 3 years.

So you're wrong. RE did not "reboaund" right after the Northridge Earthquake. It took about 8 years to recover.

PS. I wouldn't be dropping the Idiot bomb when posting such inaccurate drivel.

[Toby]

The real estate market collapsed in the early to mid 90's because the economy tanked and the region had been overbuilt in the late 80's and early 90's. The earthquake and riots were not significant events in terms of real estate values, although they were very important for many other reasons.

Posted by: Larry Kaplan

Yeah, the 10 closed for about 3 years didn't hurt RE prices or property values at all **rolls eyes**.

Seriously, that's like saying Katrina didn't really have much affect on RE prices, really, it was the bad economy prior to the Hurricane.

[ProblemWithCaring]

Aw shucks, Problem... no such luck, sport. I've been busy making money. What have you been up to?
Posted by: investorguy |

Oh nothing much Investorguy - helping people, advocating for issues I care about, playing with my loved ones - you know, being young, beautiful and debt-free in Cali! Thanks for asking.

I didnt know how much I've missed you on this blog.

[yours truly, johnny dollar]

Who signed the variances and waivers that allowed these homes to be where they are (were)? It's not nice to fool (foul) Mother Nature.
The piper is being paid. How fast will these people demand that they
get to re-build in these same places? Mother Nature is thining the herd.

[Toby]

toby convienantly omitted the part of my blog that says we will all ultimatly pay for this damage through higher premiums.

do you know what omitted means toby?...........or did you just leave that part out

Posted by: mike

They do both. They don't give uyou any money but they still raise your rates.

The last part was correct, that's why I didn't say anything. But the part about Insurance companys quickly paying out their policies is so laughable.

Here's a thought, did you know that US Senator Trent Lott is suing his insurance company because they refuse to pay out on his Hurricane coverage (home destroyed during Katrina).

A US Senator who has influence over the regulation of Insurance compaies can't even get his insurance company to cover his policy.

So please, lfor this blog sake, lets live in 2007 and not 1964.

PS As for your post below, I wouldn't be dropping the "Fool" bomb when advocating generous Insurance companies. I mean, if you don't understand that....

[Erika]

As dumb as it is to build in a fire zone / flood zone / etc etc, developers will build there because that's how they make money. and as for insurance companies, their absolute number one job is to make money for their stockholders. Providing services to people are always a distant 2nd.

[Ray in Mexican Colony of LA]

While the fires are a true tragedy there is one shining bright spot......the LIMO LIBERALS in Malibu finally got their retribution for dishing so much of America as fire charred EMPRESS of the LOONS, Barbara Striesand's Gated Compound.

The complete destruction of her empire couldnt happend to a nicer person
along with so many of the other psydo-Elites of Malibu !!!!

God bless full and complete retribution !!

[Pete Viles]

xtine wrote, "Peter - I understand you only moderate to avoid expletives and the like, but the flaming and disrespect are getting, well, boring.
Is it in your plan to curb it? Or because it is not LA Times policy to refuse publication of anything that is not foul language or solicitation, are you going to continue to "print" the personal attacks?
What is your policy at this point?"

xtine -- You're correct, I probably should not have published a few of the recent comments. The policy is no dirty words, no advertising for the sake of advertising, and let's try to keep personal attacks out of the arguments. If that's not enough for you, xtine, I apologize.

[sheila]

a few anecdotal comments:

i own a house in the Sawtooth Fire area (i was spared, by 2 lots, touch wood), which was the horrible conflagration of summer 2006 (Pioneertown). The desert bounces back much more slowly than any other type of landscape, so much of the area will be charred with little foliage for decades, as well as being subject to (worse) flash flooding, so we have been seeing this situation for the past 16 months or so.

i have been watching the market out there as a sort of hobby (partly because i was scoping out comps for a re-fi i haven't done yet), and can tell you that houses are listed for at least as much if not higher than they were before the fire. granted, sales volume is now, and always has been VERY low in the immediate vicinity (tiny town), but even in the larger Morongo Valley, i have seen many, many more high-end houses ($500K+ for this area) listed in the past year than over the 3 years prior. yes, some of them sit on the market for a LONG time, but asking prices are not dropping, for what it's worth, and people are not moving away.

that said, the area is full of breathtaking rock formations, historic charm, great weather and cool people, and that seems to add a sort of desirability or immunity that a more (pardon me) "generic" area might not enjoy. it appears that the really beautiful view houses are holding value or increasing, despite the "general" market trend and the fire, and that sellers are confident that people will still come to this area. again, not sure of actual sales prices, so it could just be that "we" are late to the melt-down party, but as we saw in Santa Barbara, gorgeous, unique homes in this $500K - $1.5M within 2 hours of LA are gonna sell regardless of the market.

i imagine that this will also be true in some of the more unique and beautiful burn areas as well, although i am not that familiar with all of them. as an aside, i always chuckle a little when i see the roughly 30,000 square miles of the "inland empire" described as a single neighborhood by the same people who will micro-dissect Los Angeles neighborhoods, street by street. Joshua Tree, Palm Springs, Arrowhead, Big Bear, etc. have about as much in common with Perris, Fontana and Lancaster as Seattle does.

[Brian]

Ray, you must be a fan of Glenn Beck.
"I think there is a handful of people who hate America," Beck said. "Unfortunately for them, a lot of them are losing their homes in a forest fire today." http://www.latimes.com/news/local/la-me-beck24
oct24,1,1363512.story
The rest of us are lucky to have two such enlightened individuals uplifting us with your concern for the whole human race.

[xtine]

Peter - Don't apologize. It's a tough line to traverse. It's your blog to do with as you please, and I like it enough to return 1000 times a day. I was just asking because I was a little taken aback by what I was seeing.

[the house of the hill]

That point where supply reaches demand is closer this afternoon.
Econ 101.
After four days, I can finally smell the coffee (smoke);
and I am at the Desilu Studios.

[Hula Girl]

The insurance companies will soon boot Countrywide out of their #1 Darth Vader position. You watch: We'll all forget about Mozillo and the Bad Loan Bears as the insurance companies come back to put the python squeeze on the erstwhile homeowners. This will make Katrina look like batting practice. The phrase "lessons learned" has been bandied about and I can't help but think that those were lessons in getting away with more. Call me a cynic, but I can't even get AAA to make good on their insurance policy - and that was for a minor towing incident.

BTW Peter - I rather enjoy the uncensored version - much like when the protesters disrupted Bill Maher's show. Sure it's raw - but isn't life. I'd go to church if I wanted my life sanitized.

[Toby]

Ray, you must be a fan of Glenn Beck.
"I think there is a handful of people who hate America," Beck said. "Unfortunately for them, a lot of them are losing their homes in a forest fire today." http://www.latimes.com/news/local/la-me-beck24
oct24,1,1363512.story
The rest of us are lucky to have two such enlightened individuals uplifting us with your concern for the whole human race.

Posted by: Brian

Do they realize that Ronald Reagan's homes(s) and Presidental Libaray is also endangered?

That the "Reagan Revolution" actually started in those burning hills?

Yeah, I don't think so either.

[Frisbee]

where is Ray's "Mexican Colony of L.A."?

L.A. IS a Mexican colony.

[MyLessThanPrimeBeef]

Investorguy, you aren not the only guy making money here.

Most of us also are.

I am buying more gold today, but not real estate.

[appraiser1]

Toby says:
"Yeah, the 10 closed for about 3 years didn't hurt RE prices or property values at all **rolls eyes**."

Please check your Wikipedia:
The earthquake damage to the 10 was fixed in **66 DAYS**.

[investorguy]

MyLess: I never wrote that I was the only one. I have dozens of friends and acquaintances who are doing very well in real estate, right now. I know others who are buying gold, others who are doing extremely well in options, and others who have decided to take 6 months off an play while RE settles down.

It's all good.

[MyLessThanPrimeBeef]

Investorguy, taking 6 months off sounds like the best option. The Rip Van Winkle's of the world are going to make a lot of money. Is it just me or is everyone yawning as well? I think I need to take a nap...

As for making money, when you keep saying you are making money everyday in real estate, am I wrong to assume that people might perceive that and see you as just a flipper in investor's clothing?

[Teresa]

I think a lot of people aren't considering these two things:

1) Not all of the homes that burned were million-dollar mansions owned by the rich; some of them were just normal houses owned by normal people

2) Just because a home didn't burn doesn't mean it did not suffer substantial smoke damage

Once smoke stench gets into walls and carpets, the only way to remove the stench is to rip out the walls and carpets. The house is unlivable until this occurs. Further, if the walls and carpets have that stench, so does all of the furniture, and it will have to be thrown away and replaced.

I cannot help but wonder how many people whose homes either burned or sustained smoke damage were barely making their mortgage payments as it is. A disaster like this pushes people like that right over the financial edge. And if anyone thinks "their insurance will pay for it," I've got oceanfront property in Arizona to sell you. Someone who was already on the edge may very well just walk away from a smoke-damaged home.

WRT the economic impact, it depends on how many homes sustained damage AND on how many of those people can afford to actually fix their houses.

[Toby]

Please check your Wikipedia:
The earthquake damage to the 10 was fixed in **66 DAYS**.

Posted by: appraiser1

They allowed cars on most of the 10 after 66 days, but off ramps and underpasses like La Cienega Blvd. took about 3 years to finish.

And believe me, you don't need Wiki when you lived it.

[investorguy]

MyLess: Rehabbing and reselling isn't the only way to make money in real estate -- although you still can do it in these market conditions if you buy cheap enough and sell at a discount from market. I also make it with rental income, flipping to other investors, assigning contracts, selling with seller financing and so on. I'm taking a time out in LA until the panic subsides, but I'm active in other parts of the country.

As all investors know, you can make money in any market -- up or down. Less in some, more in others.

[investorguy]

Uh, Toby: I don;t know what LA you were living in, but the La Cienega ramps didn't take 3 years to rebuild. Once again, check in with reality, then come on back.

[Steven]

If people stopped building their homes and lives in areas that are constantly prone to disaster we would not have this same sad story year after year!

Wild Fires have happened almost every year in California as long as history has been documented in this area. Now you have looney arsonists adding to mother natures natural way of clearing the brush. Hurricanes occur every year in the Gulf of Mexico, it's "cross your fingers" time everytime a new one is annouced on the news if you live in one of those areas.

I feel sorry for the victims of Wild Fires and Katrina for all that they have lost. The loss of homes and businesses can be life altering in the most difficult way.

People keep building further and further out of the city in California to get away from the inner city blight, fears, and minorities. They spend 1-4 hours a day fighting traffic and clogging up the freeways to live in their "safe and new communities." Come on people, if you live more than 10 miles from your work or business, it isn't worth it! Because of the desert weather of inland california, most of these folks spend their free time cooped up in their homes and they don't really get to know their neighbors. Driving in Southern California traffic can be one of the most stressful and exhausting experiences and extremly unhealthy over time.

New Orleans is located in one of the busiest hurricane zones in the world and it was built BELOW sea level. It doesn't take a genius to figure out that one.

If commons sense could speak, I bet it would say, "I told you so."

[W. Thib]

Every industry has its ethics problems, and the insurance industry is no different. They have their Saints and Scam Artists, just like the auto repair business (anyone care to refute that point?). Out of every 100 home/business owners that lost their building(s), there will probably be 1 that believes their insurance company did everything right. Another will swear on a stack of bibles that their insurance company ruthlessly screwed them into the scorched earth. Everyone else will be somewhere in between.

Even the most ethical insurance company will try to get out of paying anymore than they absolutely have to - they have to answer to their shareholders. If the money is significant, they'll fight long and hard on the disputed amount(s). That is not to say every insurance adjuster/estimator is scrupulously honest, but neither is every home/business owner.

As for everyone wondering which way the market will go, just remember: in crisis, there is opportunity. The savvy ones are buying in depressed areas/markets.

[Robert Constant]

The fact is the fire/riots/earthquake of the early 90s jump started the next real estate boom market by ending the previous bust. Of course, most of the real estate value increases of the current boom came later as people blindly paid any price with the idiotic notion that prices would never drop. However the events of the early 90s sparked the first glowing embers of the soon to be roaring market.

1) Many burned buildings were appraised at a higher than the current market values and owners who were upside down on mortgages suddenly were even.

2) Destroyed buildings reduced supply.

3) Disclocated people increased demand.

4) The construction business soared, with many feeding at the trough of FEMA money and insurance dollars. Many in the building trades found themselves substantially wealthier within a matter of months and bought new homes and pumped money into the economy buying other items.

Are things different this time? YES.

1) These fires occurred at the very beginning of the downturn.

2) This event is maller than the fires/flood/riots/eathquakes of the early 90s.

3) The building trades have already been flush with work, so there is not a significant change in their financial position from this extra work.

Another noteworthy issue is that of inflation. The 2br shack in west LA that is 600,000 today may not drop in price. However, 5 years at 6% inflation will halve its value in real dollars.

A interesting thing to consider: Your home that was $500,000 five years ago was worth 16,750 barrels of crude oil. Today its only worth around 5,500 barrles of oil ... Thus it is only worth a third of what it was five years ago!

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The fire is not the only reason why the prices might go down. Credit crunch is a virus.All over the world there is a slow down, with few exceptions