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The recent Eaton and Palisades wildfires in Los Angeles County have placed over $40 billion in residential property value at risk, a crisis that exacerbates the region's severe housing shortage. According to data from the first quarter of 2025, the fires threaten nearly 16,000 homes. This disaster occurs against a backdrop of a long-standing supply-demand imbalance, where new household formation has outpaced single-family home construction by nearly 3-to-1 over the past decade. The immediate impact includes a surge in demand for rental units, which is likely to reverse the recent trend of softening rent prices as displaced residents seek new housing.
How much property value is at risk from the Los Angeles wildfires? Based on an economic report from early 2025, the boundaries of the Eaton and Palisades wildfires encompass approximately 15,800 residential properties. The combined estimated market value of these homes is $40.3 billion. It is critical to note that not every home within the fire perimeter is a total loss. Furthermore, a significant portion of a property's value in Los Angeles is tied to the land itself. Even if a structure is destroyed, the lot may still hold substantial value, often in the millions of dollars. The reconstruction cost for all properties within the fire zones, including commercial buildings, is estimated by the data firm CoreLogic to exceed $13 billion.
What is the profile of the housing affected by the fires? The homes within the fire zones are notably higher in value than the typical Los Angeles County home. The median home value—a statistical measure representing the middle point of all home values—within the Eaton fire boundary is an estimated $1.3 million. The median value in the Palisades fire area is even higher, at $3 million. This contrasts with the overall L.A. County median home value of $870,500. These affected residences represent only 0.9% of the county's residential properties by number but account for a disproportionate 2% of its total residential real estate value.
How does this disaster interact with Los Angeles's existing housing shortage? The wildfires have intensified a pre-existing and severe housing shortage. An analysis of the last decade shows that the Los Angeles metro area added roughly 290,000 new households but issued only about 107,000 single-family building permits. This created a gap of nearly 200,000 homes. This undersupply, combined with robust demand, has kept competition fierce and home prices high. For example, in 2024, there were 36.1% fewer homes for sale in L.A. compared to 2019 levels. The destruction of thousands of homes directly removes supply from an already constrained market.
What is the expected impact on the Los Angeles rental market? The immediate effect is a sharp increase in demand for rental units, which is likely to drive up prices. Before the fires, the rental market showed some signs of cooling. The median asking rent for a 0-2 bedroom home was $2,750 in December 2024, and the rental vacancy rate had reached 5.9%—its highest level in a decade—due to a steady supply of new multifamily buildings. However, this slack is expected to be quickly absorbed. Early 2025 data shows that web traffic to rental listings in Los Angeles from local residents has surged at twice the rate of national traffic, indicating a rapid spike in local demand.
The scale of rebuilding will be immense, and displaced residents will face a tight and expensive housing market. While growth in apartment construction has helped offset the single-family home shortage, the sudden loss of thousands of housing units creates immediate pressure. Prospective buyers and renters should anticipate intensified competition and rising costs in the wake of this disaster. The data underscores that the housing market's underlying fragility has been significantly exposed by these wildfires.
