I don't see the link to why home prices would be inflated. Maybe they are or maybe they aren't, but it doesn't have anything to do with fires. People still have to live places, even if risk from climate change is increasing. Very strange editorializing from Reuters.
Property Taxes in CA are determined based on the time of purchase. They are only allowed to go up 2% per year, while the rise in market value increases much faster. Meaning that you are highly incentivized to hold on to property, thereby reducing supply more so than other property markets in the US.
This kinda distorts 3) as well, since you also want to protect that investment and then you get NIMBY stuff too. CA is trying to fix things by disallowing cities from blocking new construction, but it's slow going. on the legal side.
Maine, New Hampshire, Tennessee, and Vermont are the only states that don't have any limits on the increase in property taxes. California may be on the low end at 3%, but most are limiting to less than 10% growth. You can read more here https://www.kiplinger.com/taxes/property-tax-cap-by-state
Also the same rich people fight tooth and nail when someone wants to build housing near them - and especially if the homes being built are something besides a single detached unit.
It's the same problem as asking some crypto bro or stock holder if they want to mint new tokens/shares, why would they? It's a difficult problem to solve. Land in many places has almost all its value as a license token to build a constrained set of things. In the extreme, if density could reach infinity at a point it would render everyone else's land close to worthless for residential purposes. Once you start to look at real estates as tokens instead of land you start to realize what an intractable problem zoning is, as all the stakeholders have every reason to sabotage it.
I think the ability to own property should be a fundamental right. More so than you're ability to convince a zoning board to not build high density housing.
The problem with freedom in California, is that they see freedom as the freedom to not have high density housing near you. I literally think until those people have no where to live, will the politics change.
the word 'inflated' presumes that the price is higher than _it should be_. The underlying assumption is that homes _should_ cost less, and the current price is artificially high.
It isn't.
The price if a house is not artificially high - it is high for market driven reasons. Therefore, it is a market price. Nobody is inflating the price via some nefarious scheme.
If housing feels expensive, and there are a lot of people who would like to buy a house, then under a free market, a greedy landlord simply needs to build a 6-plex or an apartment complex to make lots of money. More people living on one plot of land should reduce costs for the individuals living there, and the landlord should still make tons of money because they are renting to, say, six families instead of one. Another greedy landlord sees this success and does something similar - the market price has been suppressed a tiny bit, but the demand is so huge and supply so low, it is barely a blip. Do this many times over, though, and we'd expect to see denser and cheaper housing over time. Landlords and developers should essentially be competing for customers by offering an attractive product (ideally, some healthy balance between good prices and good quality).
Why don't we see that happening at a meaningful scale? Because the housing market is not free - it's regulated very very badly. Where developers can build, there is a huge amount of red-tape and often a crushing process of input from neighbors - neighbors who, mind you, already own their own houses, so this new development would never be used by them. And these neighbors are also strongly incentived to keep their property values as high as possible, as owning a house has very much become an investment. It's no wonder that home owners find all kinds of reasons to say no to denser developments near their homes.
And then there's the fact that huge swathes of attractive neighborhoods are zoned for single-family homes. Developers cannot even legally consider building in such areas (and I encourage you to look into this for a city near you, it's shocking). In LA, of all the land that is zoned for residential use at all, about 75% is zoned as single-family housing. Los Angeles!
I'm not a strong proponent of the "free" market, but bad regulation is a nightmare.
> More people living on one plot of land should reduce costs for the individuals living there
But it also reduces the value of existing homes and changes the environment in a negative way, which is why people that already own homes there dislike this idea.
It's easy for someone to say that someone else should be good with this for the greater good, but regulation and zoning is everywhere and most people actually want it that way.
The people that move in your 6-plexes will probably not like when they start stacking up 50 unit apartment buildings between their 6-plexes either.
"But it also reduces the value of existing homes..."
Yes! Homes should be a place to live, not a financial investment. But this is exactly why neighbors would oppose denser development.
"... and changes the environment in a negative way."
Denser development is much more environmentally friendly than sprawling low density. Less acreage can be devoted to housing, and more devoted to nature (and to be clear, a lawn of grass is not "nature"). Additionally, low density sprawl makes it necessary to use a car and drive longer distances, because you are physically further away from stuff. In a high density area, public transit is more effective, or one can just simply walk around the corner to the grocery store or whatever.
> Homes should be a place to live, not a financial investment
Maybe they shouldn't be investments, but they are, and you can't expect people to ignore this.
I will agree that the government shouldn't incentivise this behavior, but even without the government's help they will continue to be a large portion of household wealth, like it or not.
> Denser development is much more environmentally friendly
Sorry when I said "the environment" I meant the living environment, as in: the common preference to live in a quiet low density neighborhood rather than a loud dense urban environment with all of the problems that come with it. I don't know where you live, but ignoring money and housing/rental values, if the population of your block increased 10x would you be happy about it? Even if you would be excited by that, not everyone will agree with you that stacking ourselves on top of eachother is the pinnacle of human civilization.
> Maybe they shouldn't be investments, but they are, and you can't expect people to ignore this.
exactly. Anything that cost time and effort to create is an investment. To have homes not be an investment is to say it's not going to take time nor effort to make.
People can choose to ignore this reality, but it only hurts them financially.
You're not wrong, but I don't think I made my point clear. "Financial investment" is a phrase I use to mean investing money with the expectation of receiving more money in the future. For example, a car or a computer are "investments" in the sense you used the term in that they cost money, and a person must decide if they are worth the high cost. But no one expects a car or computer to be worth more money later. The value they provide is something other than financial.
But housing is treated almost like stocks or gold, in that they are "financial investments." People buy a house and they expect, even depend, on the house being worth more money in the future.
My point is that a house should be treated like a car or computer, not a tool for growing financial assets.
>Nobody is inflating the price via some nefarious scheme.
Lol I built a house from scratch including all labor and legal aspects. Almost the whole system is designed as a nefarious scheme to grandfather in the prior generation while kicking anyone in the teeth who wants to build a place the way the voters had their own houses built 50 years ago.
Housing is one of the most highly regulated markets there are. There are all kinds of rules and regulations - primarily zoning codes - that have the effect of limiting the amount of housing in a given area.
I guess you could argue that climate risk isn't sufficiently priced in for some particular places, such as LA or Miami, but the article didn't seem to get that detailed.
That's only really the case for cash buyers though, right? If you have a mortgage, the bank will demand you have sufficient insurance.
There's a case to be made that places like SoCal and Florida having State/Federal discounted fire or flood insurance is an obvious problem. I can understand the "we don't have a way to kick everyone out of this dangerous and potentially historic area" zone, but it ends up being a subsidy of taxes from people living in more sensible areas to pay for the predictable damages to more risky areas.
If you're rich enough to buy anything in LA in cash, you're likely rich enough to eat the loss if your house burns. If you needed a mortgage then you're constrained by the insurance companies that increasingly are pulling out of areas like this for exactly this reason.
It's scandalous, though, that the public will pay for firefighting efforts in areas that are unsafe to build in. It's insane to build on a slope or in a canyon that's plagued by katabatic winds.
There's some of that, for sure, but isn't the issue that folks have been living in that area for ages? There's a lot of towns and areas that were founded 100 years ago when it either wasn't as bad of an idea, or we just didn't know how bad of an idea it was. It's not trivial to just go "yea, you all need to move to somewhere new".
> It's not trivial to just go "yea, you all need to move to somewhere new".
Definitely true. Insurance rates and property tax can incentivize this as they have in places like Florida. After this, California will probably catch up.
Just ask yourself would you buy $4 mln house on a 30 year mortgage, that you cannot insure against fire hazard, and then have a risk of loaing it in a fire every year ????
and this is the real reason why house prices are inflated in these areas - once the insurers and the banks catch up, prices on millions of homes are going to plummet as the only people able to buy them will be the people who are able to self-finance.
Won't those people have more money than the plebes who finance. I too thought the linkage was more implicit. Even if you have insurance covering everything, it's a serious inconvenience to lose all your stuff and live elsewhere for however long while your neighborhood gets rebuilt.
They have more money. Doesn’t mean they want to spend it on uninsurable houses - or at least, not unless the price of the house drops enough to make it worth their while.
Is there a reason to believe there will be no fire insurance available, vs it being very expensive? In principle you can have insurance against things that are likely to happen, as long as it's priced accordingly.
California has a regulatory rulemaking process for insurance rate-making, which prevents insurers from setting the rates they'd need to stay solvent in California's wacky combination of ultra-high property prices and ultra-high exposure to catastrophic risk. The result is insurers leaving the market.
The insurance only needs to cover cost to rebuild. Houses in LA are largely econo shitholes built on $1M worth of land. The land is still there after a fire.
Not for the majority of people. I've even heard it's becoming a common practice for HOA's to require homeowners insurance so even if you are cash buyer you could still be forced to buy insurance.
1. High risk regions will pay much higher premiums to live in those areas
2. They may continue to live in those areas because of the large demand and desirability
3. Higher insurance, higher risk, contentious demand for property in the area: inflationary housing market even if initially the impacted areas see a slow growth compared to neighbouring areas.
The article is talking about the relationship between insurance and housing prices. When insurance premiums go up, housing prices fall. When insurance is more difficult to get or not available at all, housing prices fall a lot.
> Assume a typical California home is worth $1 million and insuring it costs $5,000 annually. If the equivalent rent is $70,000, doubling the premium would reduce the house’s value by 7%
> State Farm cancelled most of its policies in Pacific Palisades last year; the median sale price there fell 16%
So, it follows that since the risk of natural disasters is increasing across the US, that insurance premiums will rise and thus home prices are inflated because they don’t account for that yet.
I see not one mention of home flipping, unless somewhere in this thread is mention of big investors flipping homes by another name. Radio is inundated by ads offering to buy homes in a 10 minute process,(or some other short interval) sight unseen.
And as an average Joe, how else am I able to make $250,000 tax-free?
The "desirable" places to live are near the ocean, where there are mountain ranges, probably due to earthquake faults (how soon we forget) and dangerous winds, plus the dry summers.
Most of the Central Valley is cheap, for a reason/reasons.
The other side of the valley is both mountainous and wooded. But low density, because most of the jobs and culture are by the coast.
House prices are high because there's not enough supply in and around the jobs. There's not enough supply because of zoning regulations. Zoning regulations were put in place to keep house prices as high as possible.
As long as there's not enough supply to meet demand house prices will trend up towards the maximum the market can afford. When the opposite happens house prices tend towards the cost of construction.
Until just a few months ago over 90% of all the residential land in California was zoned single-family exclusive.
Interest rates were pinned near zero, then locked in by mortgage holders for decades, the fed bought up some mortgage products, then rates were jacked. Supply is part the problem but essentially what happened was a magic trick where mortgagable real estate holders transferred wealth to themselves from non owners via inflation through the force of the state.
To buy them out of their negative real rate mortgage you must compensate them handsomely for losing such a loan that essentially lets them take from everyone else via fed induced inflation. This is why prices have been so sticky despite the now higher rates.
Interest rates were near zero for decades in Japan and house prices didn't budge since 1995. When rates go down prices jump, they don't keep moving as a result. It's an impulse response.
[edit] Look at the chart of housing CPI and the chart of interest rates. They're basically uncorrelated.
Prices are not going up at anything like the rate they did during the impulse event of low interest mania. They're flattening out but not lowering, as the price of buying out the opportunity cost of losing someone else's fixed low interest loan rises as interest rates rise.
So you're saying lowering interest rates raises house prices and raising interest rates 5X ... also raises house prices, and therefore monetary policy is responsible for house prices? Are you sure it's not supply and demand? Because to me, when you do X and Y happens, then you do ~X and Y still happens, X and Y are uncorrelated.
It would seem like a more reasonable assessment is that we're 5M houses short in the US [2], mostly in and around major metros where the jobs are [3], and that changes to interest rates symmetrically impact both supply and demand.
Supply and demand, yes. I have a loan at or below zero that you can't have, and if I sell the house I can't have it either. There is low supply available and high demand to keep them, which is tied to the house.
The summation of supply and demand for the materials and land as well as the financial products attached to them are all considerations. But the most notable recent supply change is those tied to monetary policy.
Zoning, codes, regulations and trades licensing have been the steadier hands on the noose but less so impulses on the accumulator. The truth is you can get around all of those if you pay cash ( I built an uninspected shithole to live in for $30k that is uninsurable and unloanable and i cant get a certificate of occupancy) but the main market is mortgagable properties tied to monetary policy.
I think the argument is that house prices are high because the government backs housing loans, so they don't represent a free market. Easy access to government creates more demand than supply.
The reality is that the government backs house prices by preventing construction via zoning rules. Japan shows us that 0% central bank interest rates do not affect pricing so long as supply meets or exceeds demand. [1]
If Japan fixed everyone's house at 0% for 30 years than jacked the rates, the owners would be idiots to sell for anything but a hefty added premium as they're sitting on a money printing machine of negative real interest rates. Unless something else is going on like the property having weird upkeep laws that make it tough to just use as is for decades.
there are 20,000 permitted multifamily units around Boston that have gotten through zoning but aren't being built because they don't pencil out. [1] I used to think zoning was the only thing in the way, but I think there are other problems, too.
I think it's a blessing that these fires have mostly hit lower density homes. I'm not saying we can't think about more density but I'm not sure we should pack the Palisades and and Hollywood hills to to the gills.
> there's not enough supply in and around the jobs
Why the anger at immigrants lately? Hint: 11.2 million illegal immigrants need to live somewhere. (Personally, I think the smaller regional banks have more responsibility to answer for this.)
If Trump is successful in his deportation efforts, house prices will likely fall through the floor, and (huge surprise) the poorer and younger ends of society will be extremely grateful, possibly even electing his successor figure. This could have been easily avoided if adequate housing had been constructed.
Immigrants are such a relatively small portion of housing supply pressure, compared to the overwhelming positive affect they have in driving other CPI basket items supply up (and therefore, keeping prices low).
Getting rid of immigrants will make houses a bit cheaper, and everything else more expensive.
Increasing property taxes so it isn't so cheap to carry underutilized housing, and getting rid of zoning regulations written with the intention of artificially limiting housing supply, will actually cause housing prices to fall through the floor, without ruining the rest of our economic output and supply of CPI basket goods.
> Why the anger at immigrants lately? Hint: 11.2 million illegal immigrants need to live somewhere.
Are they really buying this extremely expensive real estate with their low wages? Seems impossible. More likely, they will lower the already very cheap housing in the middle of nowhere.
> If Trump is successful in his deportation efforts, house prices will likely fall through the floor, and (huge surprise) the poorer end of society will be extremely grateful, possibly even electing his successor figure.
Far more Americans live in owned-homes than not. That's exactly why this problem has been so intractable in the first place. Those folks will not be happy.
> Far more Americans live in owned-homes than not.
Boomers are 21% of the population, but 38% of the homes. Only 54% of Millennials are homeowners. It's great if you're in the wealthy populous old generation; if you're young and hungry or even just an average person in their 30s, you're angry.
> Are they really buying this extremely expensive real estate with their low wages? Seems impossible.
No; [illegal immigrant] families pool multiple low wages together and buy houses together.
You keep saying this like it's a good thing. That's a disaster - China has 93%. Romania has 95%. Russia has 92%. India has 86%. A 2/3s homeownership rate is an embarrassment, and shows we haven't addressed this problem sufficiently.
> So the whole family will be mad when their home equity goes down.
"Don't fix the system; better think of those short term equity values! Even better, don't build housing!"
Note that "homeowner" in China means leaseholder. So strictly speaking, they aren't really homeowners. Land in cities is owned by the state as per the Chinese constitution, and then pieced up and handed out to citizens via temporary (decades long) leases.
> You keep saying this like it's a good thing. That's a disaster - China has 93%. Romania has 95%. Russia has 92%. India has 86%. A 2/3s homeownership rate is an embarrassment, and shows we haven't addressed this problem sufficiently.
I'm specifically responding to the idea that "most Americans" would love to see house prices drop. Only 1/3 of Americans would like to see house prices drop, the rest would be mad. That's why this hasn't been addressed in the past.
> "Don't fix the system; better think of those short term equity values! Even better, don't build housing!"
I'm advocating for building more houses, and am pointing out that the immigration axis is irrelevant to the cost of housing in HCOL areas.
116 of those people don't own homes of any kind; partially because children can't buy homes, elderly people can't maintain homes, and everyone else is too poor (or married).
Of the remaining 234, 38% are boomers, who almost never sell homes.
There are now only 146 people. How many want to sell homes? Only 8.7% of people move each year, so only 12 of those people are open to the possibility.
Now it's 1 out of 12. That's significant. That's not even considering other factors, like Gen X becoming increasingly hesitant over time to the prospect of moving, while being the second largest generation to own homes. They own 24% of the homes and are very "sticky", so it might easily be more like 1 in 9 in terms of actual sales.
It's actually even more amazing than that - we don't even need the above napkin math. 4.62 million homes were sold in 2024, 4.09 million in 2023, 5.03 million in 2022. Add a million homes, increase supply by 20% (1 in 5), that's going to leave a dent. After all, according to Redfin, only 2.5% of homes change hands every year.
Can we fight fires with a fleet of AI powered drones? I've watched water bombers [like this](https://www.youtube.com/watch?v=JrOESRoD1Jk) near my hometown. It seems like a lot of the water could be better targeted, and round trips to a body of water and back are long.
They don't even need the AI navigation problems of delivery or military drones to be solved, just to be remote piloted along a given route. But all that solves is removing the risk to the human pilot and their weight - possibly being able to get closer to the fire. We still need to move volume of water to the target, and that means getting a lot of flying vehicles to the right location and time. There's been plenty of big area fires, but this is as bad as it gets in terms of population and assets exposed, so we need a lot of vehicles delivering water to a lot of locations simultaneously.
Being prepared for this scale of operation means either having specialty firefighting planes and drones in reserve, or having other vehicles - general purpose drones or cropdusters or, heck, a Globemaster with a big ballon full of water in its belly - that can be repurposed and sent to this emergency from all over. Airships would be nice for the volume, but they aren't exactly friendly to the turbulent conditions near a fire.
I feel like the thrust-to-weight dynamics on multicopter drones don’t really lend themselves to heavy payloads like water bombing in the quantities needed. An additional issue is that, due to wanting to maximize power density for the high amperage motors, you often end up using lithium-polymer battery formulations that are less than adequately shielded for the possible impacts the drone might incur. I would be concerned that the risk of a drone failure itself igniting a new fire in a remote area would outweigh the potential.
I tried doing some back of the envelope math but it doesn’t come out in favor of drones.
The CL-415 that you shared in the link has a reported capacity around 6100 kg of water. When I searched for “heavy lift drones” I got the Draganfly Heavy Lift, which can reportedly carry 30 kg but only for 18 minutes of flight time (according to the company’s web site). I think the plane’s flight time is around 3 hours but obviously the math is a little more complicated than that.
We’re talking, like, $10 million in drones to replace one pilot for 18 minutes.
I don’t see any reason to believe there’s a pilot shortage, and I don’t understand what’s wrong with the current targeting, or how that could be improved. There’s a whole strategy to fighting fires of this scale. I don’t think the strategies are obvious to people on the ground.
The question has come up several times on the thread so far, and just to add my read to it: the claim that Los Angeles housing prices are inflated seems to rest in part on the fact that they're about to get a lot more expensive to insure. The annual costs of ownership of a house --- taxes, insurance, and upkeep, probably in that order --- work against the market value of a house. I live in an extremely high-tax inner-ring suburb of Chicago, and the conventional wisdom is that our taxes knock double-digit percentages off our home market value.
Maybe the article is saying the same effect could hit markets around the country more broadly as insurers everywhere jack rates up in response to climate change?
As mismanagement and environmental issues unfold, in the narrative I play in my head to keep myself sane, insurers are kind of heroic. I know they aren't really, but: one thing you can say for them, they're some of the only players in our economy that are required to price externalities. Political bodies and residents can delude themselves about risks indefinitely, but an insurer that ignores them will be insolvent. You could write a state statute capping insurance rates, but, as you've seen, that just forces insurers to leave the market. They don't have a choice. It's kind of wonderful.
They already are, but that's kind of besides my point. I don't doubt that California can throw billions of dollars at subsidizing housing built on parcels so dangerous no insurer can underwrite there. I don't live or die based on whether people can afford to live in Pacific Palisades. But it's somehow sanity-preserving for me to watch insurers exit markets (or drastically increase rates). At least one party to this system has to acknowledge reality, and no organizing or speechifying gets you around it.
> Nine of the Golden State’s 10 largest infernos since 1932 have occurred during the past decade, according to the local forestry and fire protection department.
With how far technology has come since 1932, I personally believe incompetence is being exposed not inflated home prices
You mean building a house with wood inside a forest area and have it surrounded by big and large trees. I get the aesthetics of it but don't complain about your house burning in a large fire. I've seen some footage and the trees have fared better than the houses. Tells you something about not preparing for any of this.
There have been plenty of wild fires in California for millennia. The incompetence is draining the LA river wetlands to build houses, building millions of houses where fires occur, building where water is in short supply, and not building fire breaks and fire suppression systems because they’re “ugly”.
