LA wildfires will put pressure on Las Vegas’ housing market, expert says

The Los Angeles wildfires will most likely put pressure on the Las Vegas Valley’s already tight housing market, an expert says.

Because wildfire damage and losses often cause homeowners to consider relocating, it’s likely some Los Angeles residents are considering moving to the valley, said Shawn McCoy, director and associate professor for the Lied Center for Real Estate at UNLV. He bases his statements on a 2018 UNLV study on wildfires in Colorado where nearly 360,000 homes across eight Colorado counties were impacted by 18 severe wildfires between 2000 and 2012.

“The data tells us the fire shocks the media, it’s all over the news, everyone is talking about it, even in neighboring states like here in Nevada, and the market starts to react,” McCoy said.

Los Angeles consistently tops the list of in-migration to the Las Vegas Valley, and close to 158,000 people relocated from California to Nevada from 2019 to the end of last year, making up 43 percent of all new residents to the state, the biggest out of any state in the nation, according to the Nevada Department of Motor Vehicles.

Daryl Fairweather, chief economist for Redfin, said those looking to relocate from California to Nevada won’t be decreasing their chances of losing their home to a fire in the future, but it will be more affordable.

“If people move from Los Angeles to Las Vegas, it won’t necessarily be for lower fire risk, but for better affordability, she said. “Los Angeles rents will likely rise given that the housing stock has been depleted by the fires, and households that have lost their homes need places to live. Some of these people will leave Los Angeles because they have been priced out. And L.A. renters who are on the margin of being able to afford to rent a home in the area will also be priced out and move elsewhere.”

McCoy said his study showed home prices in wildfire-prone areas fell immediately following a fire, however they largely rebounded within one to two years.

But homebuyers still place a premium on homes in desirable areas that have views, are close to water, dense vegetation and mountains, which means many of the Los Angeles’ homes impacted or destroyed by the wildfires could be built back at a higher value given general market dynamics, he said.

Over the past week, wildfires, largely the Eaton and Palisades fires, have destroyed thousands of homes and killed at least 24, according to reports. More than 92,000 Los Angeles County residents are under evacuation orders, an additional 89,000 are under evacuation warnings and more than 12,000 structures have been destroyed.

Impact on Las Vegas rental market

McCoy said there could also be an impact on the local rental market, as displaced residents look for places to live.

“We may certainly see the fires in L.A. place upward pressure on rent locally in Las Vegas, both as a result of displaced L.A. households whose homes were damaged, but also from two other important groups. Households near the wildfires but that were not directly affected by the fires may now hold a heightened awareness or concern of potential future fires and act on that heightened awareness by moving out,” he said. “This may be especially true given research which shows that about 18 percent of the housing stock in the Palisades is multifamily housing.”

The wildfires may also discourage people who are considering moving to Los Angeles and push them to consider alternative areas, McCoy said.

“Think, for example, about households currently outside of L.A. or even the state of California who were in the process of considering a move to LA. These fires may change these households’ perception of L.A. fire risk and instead of moving to L.A. to rent, they may instead turn to other cities including Las Vegas.”

Fairweather said there will most likely be a “modest impact” on rental and home prices in the Las Vegas Valley because of the Los Angeles wildfires, however other areas will also see an influx of residents as well.

“Las Vegas may be one of the places Angelenos move, but it won’t be the only place.”

What is Las Vegas’ fire risk?

Las Vegas homes actually have a higher risk for major fire (34 percent) than Los Angeles (30 percent) over the next 30 years, according to First Street, which analyzes the relationship between climate change and financial risk.

Redfin ranks the Las Vegas Valley as the seventh-highest metro in the country when it comes to its share of properties with a high fire factor risk (92 percent), ahead of Los Angeles, as approximately 26,546 homes in the valley right now have a “high risk” of being lost in a wildfire.

According to the Environmental Protection Agency, the risk of wildfires has increased over the past few decades and the Western U.S. in particular has seen its wildfire season increase by more than 100 days since 1970 and cost approximately $90 billion from 2017 to 2021 alone.

Contact Patrick Blennerhassett at pblennerhassett@reviewjournal.com.