The real estate left behind after a fire
December 19, 2018
Last month the Town of Paradise, CA was destroyed during the Camp Fire. The flames showed no mercy as they took lives and leveled nearly 14,000 homes. The devastation is simply unreal and hard to fathom.
Today I wanted to do a Q&A about the aftermath of this fire and what’s happening in the surrounding real estate market as a result. It’s sobering to know there are tens of thousands of people trying to figure out what to do and where to live, which is why this is important to talk about. I asked Parke Noble with California Appraisals to answer some questions since he’s a sharp guy based about 15 miles from Paradise. We didn’t talk about post-disaster appraisals because a different interview covered that, but I hope you find some insight here. And for reference, the Town of Paradise is about 90 or so minutes from Sacramento.
Ryan: I guess this is a heavy start, but what was it like to witness the Camp Fire? I know Chico is about 15-20 miles away.
Parke: I live in Chico, so my direct immediate exposure to the tragedy of the Camp Fire was from a distance; I can’t begin to imagine the chaos that those who witnessed the devastation experienced. And I can’t fathom the heartbreak that they continue to experience now that access restrictions for the Town of Paradise and the communities of Magalia and Concow have been lifted. Please keep in mind that although “open”, the Town of Paradise access is intended for those directly affected.
Ryan: Do you think people are going to rebuild in Paradise? Why or why not?
Parke: With regard to rebuild options, it has been my experience that less than 50% of those who lost their home intend to rebuild. Although the reasons are numerous, the primary concern has focused on the fact that as an aged demographic many survivors have indicated that they don’t want to spend the requisite time that it’s going to take to rebuild. They’re either attempting to secure a “turn key” option in neighboring communities or moving out of area altogether. Additional factors include a lack of qualified contractors and the fact that as a ridge community another fire could possibly occur in the future. On top of this we have to remember the lack of infrastructure in Paradise; no services. There is apprehension for those that do choose to rebuild. What if the town doesn’t “come back” and you’re left with a house without infrastructure?
Ryan: We’ve been reading reports about housing inventory being depleted in Chico because of the massive amount of Camp Fire refugees. Is that true?
Parke: Single family residential inventory in Chico has been dramatically impacted since the November 8th Camp Fire. Per CRMLS data, detached single family residential active listings numbered 252 on November 7th. As of December 4th that number had dropped to 91 offerings (-36%). That number had increased to 106 active listings as of December 19th.
Ryan: What do you see happening with prices in Chico right now? Is the market as aggressive as people are making it out to be?
Parke: Prices across every market segment have experienced substantial demand and consequently higher median resale prices. The current Chico market indicates sales 5-25%+ above list price. List price average increased +10% from November to December. Sale price average has increased 9% from November to December and days to sell declined from an average of 54 days in November to 19 days in December. As an example, a listing at $485,000 sold for $612,000 in three days with multiple offers. Ongoing sales above list are the market norm right now.
Ryan: How long do you think this type of activity can keep up in the market?
Parke: The current Chico market dynamic is vastly different from anything experienced in the past and was virtually an immediate impact with the sudden loss of about 14,000 homes in the Camp Fire. It’s unlike the consistent, sustained price creep and gradual inflation experienced in Chico in 2006-2007. This type of sudden market hyperinflation will continue as long as demand supports the small inventory. As a side note to ask appraiser peers: How will the sales during this period of artificial inflation be handled as comparables when these current conveyances don’t qualify as standard, arm’s length transactions?
Ryan: What advice would you give to sellers and buyers in Chico?
Parke: Depending on what side of the transaction you’re on, you’re either quite happy with the value increases or extremely discouraged. As with any market anomaly, there are parties looking to capitalize. Numerous active listings saw increases in asking price after November 8th. And the increases were absorbed by a desperate market willing to bear. Any advice for a seller and/or buyer would virtually be a moot point; the entire current market is a deviation from an outlier in an anomaly…..
Ryan: How would you go about valuing a property in Paradise right now?
Parke: Valuations in Paradise will be for vacant parcels. I can’t imagine attempting to demonstrate the influences/effects of such vast devastation on those residential structures left standing. An adequate data set does not exist at this time.
Ryan: You’re a numbers guy, so what numbers (or data) do you plan to watch over time to help you understand the market?
Parke: I’ll continue to track inventory, list-to-sale ratios, sale price averages, days on market, etc. Time will be required to collect and analyze.
Ryan: Thank you so much for doing the interview. You killed it and I appreciate your time and insight.
Parke’s Bio: Parke Noble has been serving Northern California since 1997. Experience includes appraising single family residences, multi-family residential (2-4) units, in addition to condominium, PUD, manufactured housing, proposed construction, and FHA/HUD roster work. Additional experience in narrative reports, highest and best use studies and HUD Rent Comparability Study (RCS). Service area within Butte County. Parke is a graduate of Chico State University and he is originally from Sacramento.
I hope this was helpful or interesting.
Courtesy of www.LundquistCompany.com