As Boulder County tackles the immediate impacts of the devastating Marshall Fire that destroyed or damaged nearly 1,000 structures and two dozen businesses last week, local experts warn of long-term, years-long effects on the real estate industry.
When the fire broke out in December, it had just 968 single-family homes available and 509 listings for attached housing. The Denver Metro Association of Realtors reported that there are now 1,000 fewer homes on offer throughout all markets as a result of this tragedy - which is affecting not only buyers but also sellers who want to move up or down often enough before their next upgrade cycle begins again!
“There are two extremes,” said Kelly Moye, a realtor for Compass Inc. in the Boulder County area, who is also a spokesperson for the Colorado Association of Realtors. “Immediately, what this is doing is putting a really big strain on a very low inventory market. There are about 1,000 families who need housing... We already had a really tight rental market; it is ridiculous now.”
Metro Denver is currently home to about 14,300 vacant apartment units. However these are all being prepared for the next tenant so it's important not to read too much into this number and think that there will be no more rental property available in our area soon! The 3% vacancy rate means we're very close (or perhaps even exceeding) what could potentially become an exclusively rented landscape come 2021 when new estimates arise from CAA president Drew Hamrick.
The expected rise in property values could cause a problem for home buyers who are not from these areas. Moye fears that if you live near an area with higher-than normal fires, your house may become more expensive and difficult to purchase because of the damage it sustained during last year’s disasterous wildfire season.
For example, Moye said the neighborhood Rock Creek in Superior has seen extremely high demand for the last five years. But the fire swept through Rock Creek, damaging and destroying many of the homes there.
“I think of the people whose houses are left there, and what it does to the value of their home,” she said. “It’s significantly a challenge in the other extreme. I think they’ve lost pretty much everything in terms of their home value. It’s hard to imagine anyone wanting to be there."
That leaves homeowners who were looking to sell in a very tough spot — and could have undone years of building equity, Moye said.
"It’s going to put a very big toll on the real estate market … If someone was moving here from California and wanted to move close to Boulder, this would be a popular neighborhood. But the way it’s going to look — the way it looks now and will for a few years — I think it will be very hard to get people to want to move in there.”
Moye said homes in that neighborhood would've seen approximately 10 offers in a weekend if they were listed two months ago.
"For those poor clients whose homes are there, they lost the equity and potentially lost the value in their house for at least three to five years," she said.
There is very little precedent for what the fire will mean for Rock Creek, Moye said — and other neighborhoods like Sagamore in Superior and Enclave in Louisville, which both had total destruction. But for some idea of what to expect, she looks to the Boulder floods of 2013. Following that disaster, it took about two years for homes in the impacted area to overcome the stigma of having been flooded or being in the flood zone and start selling again, she said.
In this case, though, there’s the added issue of a constrained supply chain and a labor shortage. As quickly as some of these homeowners might want to rebuild, it just may not be logistically feasible. Some may choose not to rebuild at all, leaving lots empty for years.
The Immediate Challenge
“Replacing 1,000 existing homes more or less is a gargantuan task,” said Stephen Myers, CEO of Thrive Home Builders. While Thrive does not do home rebuilds, it is developing new builds in downtown Superior. “The impact on the industry will depend on over what period of time that takes. The industry is short on labor and short on materials. Within that context, the community’s attempt to rebuild will be a challenge for sure.”
For a company like Thrive, which is attempting to address the region’s housing shortage by building more homes, they will now be accessing the same suppliers as others completing reconstruction, making it harder for everyone to get the materials they need.
“I’m confident the construction industry in Colorado can deal with it,” Myers said. “It’s not going to be easy and not as quick as we want, but at the end of the day, the industry can meet the demand.”
Colorado’s insurance industry will also be working to fulfill the claims filed by homeowners and renters.
“In the short term, the insurance industry can handle 1,000 homes being burned, unfortunately, and pay those clients by responding to this with extra resources [like their national catastrophe teams],” said Carole Walker, executive director for the Rocky Mountain Insurance Information Association.
Walker said the insurance industry can handle so many claims because it’s diverse, with many carriers in Colorado.
“We’re facing a new reality with an increased risk of catastrophic events,” she said. “There is a lot of pressure politically to crack down on insurance companies to put more pressure on the market, but we really need to talk about keeping a vibrant insurance market in Colorado. We have that now, but with the wildfire threat, it becomes more challenging.”
The Colorado Apartment Association has also launched a housing directory for families displaced by the fire, helping them locate vacant rental housing.
Ripple effects for years
Moye said she expects the financial impacts from the fire to have ripple effects.
For example, those who lost their homes and now will have to rent may lose out on some of the tax benefits of owning a home, she said.
Moye anticipates there will be people whose insurance covered a certain amount for rebuilding, only to find out that rebuilding will be more expensive than their coverage. Those who lost homes they did not own will likely be renters for the next several years, she said, and will likely be less likely to be able to buy a new home until they get insurance payouts, which will take time.
“All of those things overwhelm you when you think about it,” Moye said “But time will tell. It’s too soon to know what will happen to real estate values in those neighborhoods and for those homeowners who still have homes, how they’re going to fare over time. It’s reasonable to think those neighborhoods will be impacted for the next three to five years until things get rebuilt.”