The recent onslaught of wildfires and accompanying smoke blanketing many states are combining with the pandemic with deadly results. It is not just personal health that is being affected — there are significant implications for real estate as well.

Gazing at the moon recently through the haze of smoke from nearby fires, its red crescent shape hung in the evening sky like a flaming sword of Damocles. 

It is no secret that, in addition to the devastation wreaked by the fires, the resultant smoke is accentuating COVID-19 susceptibility due to the increase of PM2.5 particulates in the air. Although the dangers to health are significant, it’s worth pointing out that there is an eminent threat to real estate as well. Here are our top six concerns. 

1. The loss of residences is accentuating the current housing crisis

In a season where the lack of adequate housing has reached crisis levels, the wildfires could not be happening at a worse time. Stretching across the Western states, wildfires have destroyed thousands of homes in the past couple of years alone, forcing residents to find alternative housing.

It has not been easy, as many who have lost everything have not had access to the funds required to secure adequate replacement housing and rebuild their lives from scratch.

Additionally, a significant number of homeowners have discovered they were underinsured, making rebuilding impossible. Although the insurance in place on their home may have been enough at the time the policy was written, care was not taken to keep pace with escalating material and labor costs.

The result has been hundreds of fire victims scrambling to find replacement housing of any kind in an environment where rental prices are ratcheting upward due to a lack of inventory.

2. Lumber prices are spiking due to current wildfires

It was bad enough that lumber prices shot through the roof due to COVID-related sawmill closures. Just when it looked like mills might be reopening and ushering in lower prices, the wildfires forced a reshuttering of some sawmills and slowdowns for others.

Lumber futures have recently soared over concerns that prices will soon be on the rise again due to production shortfalls. Some homeowners, trying to rebuild after their homes were destroyed in previous fires, have been forced to put their construction on hold due to rapidly increasing building costs.

Lumber is not the only issue here — the supply chains for many products were significantly damaged due to COVID-19 plant shutdowns or the inability to procure raw materials. Prices have increased for many products while availability for other items is almost nonexistent.

Items such as appliances have been significantly hit due to stainless steel shortages. At a time when the wildfires are increasing demand, current supply chain challenges could prevent rebuilding for months and push material costs even higher.

3. Insurance companies are refusing coverage

I recently purchased a vacation home located in a mountainous region and was shocked by two things: the refusal of most insurance companies to underwrite the property and the incredibly high price of the policy I was finally able to secure.

Many who have considered rebuilding their homes after losing them to the fires are rethinking things due to the lack of affordable insurance. Additionally, at a time when COVID-19’s work-from-home freedoms have been allowing some to move out of urban centers and into more rural areas, the cost of insurance alone may have some rethinking that strategy.

4. Smoke is forcing some to reconsider where they live

As those with lung-related conditions will attest, COVID-19 has forced isolation and sheltering-in-place to a larger degree than most. Unable to go outside yet tired of being forced to stay inside, smoke from the wildfires has made the situation even worse.

Some are considering installing expensive particulate filters on their current furnaces, while others are simply looking to move to locales where there is consistently better air quality.

5. Areas hard-hit by fires may need to reconsider future development plans

Fueled by the housing shortage, communities such as California’s Santa Rosa, Paradise and Ventura have allowed building in fire-prone regions, named the “wildland urban interface.”

As Jacob Passy wrote in this article, “Researchers from the UC Berkeley Center for Community Innovation and the nonprofit think-tank Next 10 examined three communities across the state that were affected by recent wildfires.”

He further quoted researchers as stating, “Following a fire, many municipalities opt to ‘adapt in place’ instead of attempting to move people out of high fire risk areas, pointing to the statewide housing shortage and lack of public support for any sort of climate migration strategy.”

Although understandable from a “convenience” point of view, these policies will ensure that the problem only escalates. At some point, insurance companies will most likely pull out altogether.

6. Long-term governmental incentives for housing hampered by wildfire expenses

Ideally, housing could be provided on a larger scale if governmental incentives were in place. Instead, it is estimated that, in addition to the staggering costs of COVID-19, wildfires cost the U.S. economy $148.5 billion in 2018 alone.

If the situation is allowed to continue its current course, these costs will continue to escalate as housing prices and the cost to replace burned homes will increase, thus making it even more difficult to bridge the housing shortage and affordability gap.

It is a vicious circle: The fires, introduced into an environment already made fragile by COVID-19, make the current housing crisis even worse. The responses to the fires, including allowing owners to rebuild in place, could place further strain on a system that is already coming apart at the seams, further perpetuating the crisis.

Factor in global warming, and unless we see some significant changes, there is no question that dire days lie ahead.

Carl Medford is the CEO of The Medford Team.

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