As a member of Leading Real Estate Companies of the World, we are privy to global economic insights from LeadingRE’s Chief Economist, Marci Rossell, who takes complex economic issues and makes them relevant to buying and selling real estate. In this edition, we are covering the Economic Effects of Recent Wildfires in California.
The recent wildfires in California have devastated thousands of acres of homes. The economic impact is felt both locally, due to the decrease in supply of homes, as well as nationwide, due to an increase in the cost of building materials.
LOCAL SUPPLY AND DEMAND
The devastation of property has created a decrease in supply of homes.
• Lower-tiered homes (costing less than $500,000) had already increased by 9% in 2016.
• This will continue to place an upward pressure on the more affordable segments of that region, exacerbating the issues around affordable housing in that community.
The effect this will have across the United States will be due to the increase in the cost of building materials.
• Prices of building materials rose faster than inflation in 2016.
• Prices will continue to rise as shortages develop when rebuilding gets underway.
• The hurricanes in Texas and Florida will also contribute to the increase in building materials cost.
Overall, affordable housing will be hit hardest as price increases make it more difficult to build in the lower-price tier.
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