California Wildfires

California Wildfires

  • 07/12/19

California Wildfires and How it Affects Our Real Estate

In an article from Inman Magazine written by Christy Murdock Edgar, she interviews a San Francisco-based professional real estate investor, Nick Giovcchini, as he shares his thoughts on how the recent devastating California wildfires and how they have impacted the surrounding area.

California Wildfires
Living in California, wildfires are always something we need to be on high alert about, especially in certain regions across the state. Although certain areas are more prone to wildfires than most, fire’s do not discriminate, and we saw this first hand in last year’s Camp and Woolsey fires. The whole town of Paradise was burnt to a crisp and even celebrities were forced to evacuate from their multi-million dollar homes.

Giovacchini has a background in risk analytics and index solutions with a focus and unique insight into the impact of natural disasters on investment, as well as how investors and their real estate advisors can be prepared for the future.

The fires lasted a long 18 days from start to total containment and the Camp fire in Butte County had roughly 14,000 homes impacted, with 13,500, (approximately 1/3 of the county) of those destroyed completely. There were 530 commercial buildings and an additional 4,000 structures destroyed as well. $153,000 acres were burnt and about $7.5-10 billion dollars were literally thrown in the fire. The massive impact the fire had is part of FEMA’s mandate to create the infrastructure needed to begin recovery.

In Malibu, the Woolsey fire damaged 97,000 acres and roughly $1,500 structures were destroyed. This fire was much less destructive than the Camp fires, however, the impact for those affected is the same. Even though the fires happened a year ago, the people affected still face the grim reality the fires have caused today.

How the California Wild Fires Affect Agriculture

California Wildfires

Butte County was not a large agricultural area but a big part of our economy is also based on ranching. Because of this, the displacement from the fires is not just of people, but livestock as well. Ranchers have banned together to find homes for displaced animals on new ranches that were not destroyed.

Giovacchini says, “in terms of pure agricultural impact, a lot of farms around Los Angeles and Southern California evacuated early and expedited their harvest when the fires first started, so that helped prevent some of the bigger commercial impacts and overall the impact was far greater on the residential side.

How California Wines were Affected

Murdock poses the question, Terroir is so integral to the production of wine — air quality, soil quality, and water quality all have a huge effect. What are you hearing regarding the long-term effects of the fires on these elements? Giovacchini says ultimately, the biggest fear when it comes to wine is that it would be tainted with a smokey flavor. He says that thankfully because the fires came late in the growing season, most grapes were already harvested.

“The Malibu Coast American Viticultural Area (AVA) was an exception — it was really shattered by the fires, and we don’t have a full impact assessment yet. Napa, Sonoma and Simi Valley seem to have fared far better. As California is undergoing these cycles of drought followed by heavy rain, the longer term impact has yet to be fully understood.”

Our Government’s Response to the California Wildfires

Giovancchi says, “Governor Jerry Brown and Governor-elect Gavin Newsom took action and requested relief early on, which got FEMA involved relatively quickly. And both the Secretary of the Interior and the Secretary of Agriculture toured the Northern California area.

Issues like climate change, which we hear about all day long in the press are one of the factors making natural disasters more frequent and deadly, but what politicians and leaders need to do is focus on the problem at hand, which is preparing the public for these situations. Giovancchi makes a great point, “We also need to ask where the funding and manpower come from to deal with disasters. People having to actually coordinate the response to these incidents should have this information.”

What Should People Think about When Considering Investments in California Real Estate Moving Forward?

Investors should make sure the property under consideration is adequately insured and protected and consider if the area is in a flood or fire zone. “It is important to consider the impact a major disaster will have on market values when there are lawsuits and damage assessments involved.”As homebuyers look at areas and properties, they’ll need to factor in the potential for these types of disastrous events. And it’s important for buyer’s agents to look at how natural disasters have been managed in the area their clients are interested in.” Real estate agents need to make sure their buyers are well informed about this information and as protected as possible.

Source: Inman

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