In this episode of The REconomy Podcast™ from First American, Chief Economist Mark Fleming and Deputy Chief Economist Odeta Kushi discuss the housing impacts of the recent Los Angeles wildfires, including a preliminary estimate of how much housing supply was lost, with the help of native Angeleno and Senior Commercial Economist Xander Snyder.
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“It's no secret that Los Angeles has already been struggling with a housing shortage in recent years, and the scale of the reduction we're talking about from the wildfires suggests that it could take several years to catch back up to just where we were at the beginning of this year.” – Xander Snyder, senior commercial real estate economist at First American
Odeta Kushi - Hello and welcome to Episode 108 of The REconomy Podcast, where we discuss economic issues that impact real estate, housing and affordability. I'm Odeta Kushi, deputy chief economist at First American, and here with me is Mark Fleming, chief economist at First American, and Xander Snyder, senior commercial economist. Hey Mark. Hey Xander.
Mark Fleming - Hey Odeta, Hey Xander. Well, what a wild start to the new year. Aside from the normal economic stuff we usually talk about -- interest rates remaining higher than many expected or ongoing sluggishness of the housing market -- there is unfortunately a natural disaster in Los Angeles, that seems on pace to be the most destructive fire in California's history. For those who don't know, Xander lives in LA was fairly close to one of those fires, and actually had to evacuate at one point.
Xander Snyder - Yes, I'm fine. My family's fine. My house is fine. But we do know a lot of people for whom that isn't the case, people who woke up one morning just expecting another work day that lost most of their earthly possessions in a matter of hours.
Odeta Kushi - It really is hard to fathom, but we're so glad that you're okay and that we'll do what economists always try to do on this episode, measure and quantify changes. It's critical to remember that these numbers represent tens of thousands of lived experiences and individual tragedies.
Mark Fleming - Agreed. Discussing data around natural disasters is challenging for that very reason. Another thing worth noting about today's episode is we are recording it on the 16th of January. The fires are currently still active, and the crisis remains ongoing. So Xander, with that said, can you walk us through what happened and where?
Xander Snyder - Sure, there were two major fires, in the Pacific Palisades along the ocean, and in Altadena, which is much further inland along the foothills of the Angeles Crest mountains. There were several other smaller fires that spread across the city that also drove people to evacuate. While firefighters are still actively battling these fires right now, and the final toll in terms of lives and property is still rising. One thing that we can know with certainty at this point is that a substantial amount of housing has already been destroyed across the city.
Odeta Kushi - Economists call this sort of event, when the supply of something is reduced rapidly and unexpectedly, a supply shock. The extent and severity of that supply shock depends on how much supply, in this case housing supply, was lost relative to existing supply, and whether demand can quickly adjust or not.
Xander Snyder - That's right, and sudden scarcity drives up prices, obviously, assuming no offsetting decline in demand. And, in the case of Los Angeles, we should expect the rapid destruction of housing stock caused by the wildfires to increase the cost of housing. And in this episode, we're going to focus primarily on rental prices. However, knowing the extent to which rents increase depends on how much supply was lost, right, and the preliminary data we have to work with so far, since the fires are still ongoing, is imperfect, but we can still use it to arrive at a rough first estimate of housing supply destroyed. Typically, housing supply is measured in terms of housing units, both owned and rented units. However, the destruction caused by fires are usually reported in terms of structures, a less exact unit of measurement than a housing unit.
Odeta Kushi - So then, what is a structure? Exactly?
Xander Snyder - Well, according to Los Angeles County Fire Chief Anthony Morone, structures can be houses, apartment buildings, commercial properties, but also things like sheds, chicken coops, or even in some cases, vehicles. So that makes translating structures to housing units challenging and somewhat inexact.
Mark Fleming - And the difficulty in understanding what exactly those structures are is related to how the data is collected, right? Firefighters fly over impacted areas and use infrared aerial photography to map the destruction, and it's really difficult to tell automatically by filtering out structures that aren't what we typically think of as commercial or residential properties.
Xander Snyder - Yes, that's right, although it is worth mentioning that officials examine these photographs over time manually and attempt to exclude vehicles where possible, so that they can get a more accurate count of building structures, as we typically talk about buildings, so that suggests that the structure count should trend towards the true building count over time.
Odeta Kushi - So how do we get from structures to housing units? To estimate the impact of the fires on the Los Angeles housing market, Xander's analysis in the latest X-Factor blog post tries to answer this question. You can find that on the First American Economic Center. In it, he estimates housing supply based on structures destroyed. It depends on a number of assumptions, which Zander laid out as clearly as possible, so others can tweak and play with the inputs on their own. But could you clarify what some of those assumptions were for us, Xander?
Xander Snyder - Sure. Well, for starters, it seems that a quarter of all identified destroyed structures are not buildings, as we typically think about buildings, but other things like detached storage spaces or sheds or vehicles. Second, I assume that the proportion of single-family residences, multi-family properties and other commercial properties is the same in the impacted areas as in the rest of the city. Lastly, it assumes that average housing density in both Altadena and the Pacific Palisades is roughly 20% lower than the average density across all of Los Angeles, and that's based mainly on my familiarity with both locations, but also using some city zoning density maps.
Mark Fleming - Okay, doing the proper economics thing and disclosing all of those important assumptions, what did you find in terms of the impact on housing supply in Los Angeles from these wildfires?
Odeta Kushi - And to try to put that in some context, the latest Census data we have from 2023 shows that there are a little over a million and a half units housing units in LA. That's before the fires. That means that a 17,000 to 24,000 unit reduction would equate to roughly a 1.1% to 1.6% reduction in Los Angeles' housing stock.
Xander Snyder - Well, using estimates of structures destroyed of between 12,000 and 17,000 and that's based on different media reports. I estimate that between 17,000 and 24,000 housing units may have been destroyed by the wildfires in roughly the first week of their outbreak. So that includes both single-family homes destroyed, as well as apartment units in multi-family buildings. Yes, that's the best first estimate I have based on those assumptions that we just reviewed.
Mark Fleming - It can be understandably difficult to grasp the scale of a supply shock using percentages like this, especially in a large and spread out city like Los Angeles. Is there another simpler way to think about the scale of this destruction?
Xander Snyder - Yes, a more tangible way would be to look at the number of housing units built in LA over the past three years. So from 2021 to 2023 between 10,000 to 15,000 new housing units were added each year.
Odeta Kushi - Wow. So that would suggest that the number of housing units you've estimated have been destroyed by the LA wildfires exceeds the new supply delivered in any one of these post-pandemic years?
Xander Snyder - Yeah, that's right. And it's worth mentioning that those additions to housing supply in 2021 through 2023 equate to annual rates of growth of between half a percent and 0.9% and that's roughly in line with the average annual growth rate of housing units in LA, new housing units added from 2000 to 2020, so the growth in housing units in these post-pandemic years is not abnormally high or low compared to historical trends.
Mark Fleming - Of course, none of this is welcome news for Angelenos. It's no secret that Los Angeles has already been struggling with a housing shortage in recent years, and the scale of the reduction we're talking about from the wildfires suggests that it could take several years to catch back up to just where we were at the beginning of this year.
Odeta Kushi - Now, in terms of how this will impact residential rents, there's a good amount of research showing that natural disasters that destroy homes -- that's not just fires, but also floods, hurricanes and other events -- cause them to rise. One paper from Brookings suggests that residential rent growth is 6% higher on average than it otherwise would have been two years after a natural disaster occurs.
Mark Fleming - Right? And, in this case, that 6% on average bit is worth highlighting. This is because rents can increase significantly more than 6% in the aftermath of specific natural disasters. For example, in the aftermath of the Camp Fire in 2018, also in California, the median asking rent for a two-bedroom unit was 25% higher one year after the fire.
Xander Snyder - Yeah, and I'll mention that the Camp Fire has been, to date, the most destructive fire in California's history in terms of structures destroyed, and the current LA wildfires are on pace to beat that unfortunate record. Another major difference between the Camp Fire and the current fires is that the Camp Fire happened in a meaningfully less populated part of Northern California. By contrast, Los Angeles is the largest city in the state and the second largest in the country, and it is extremely difficult to build in for a number of reasons.
Odeta Kushi - Yeah, I think we're, you know, circling around a fundamental part of how a housing supply shock impacts rents. If demand decreases substantially along with supply, then rents won't rise as much. In the case of LA, this could happen if a lot of people who lost homes decide to leave LA altogether and rebuild their life in different cities, but if demand for housing remains relatively unchanged, the impacts on rent from the supply shock could be substantial.
Mark Fleming - And don't forget that there's often an influx in demand on the part of disaster recovery workers and contractors who also need shelter, and even renters whose homes weren't destroyed can be impacted because they too have to pay the higher rent or try and find another apartment in short supply when their leases end. There's some speculation that the LA fires could even raise rents as far away as Las Vegas, as displaced households try to find affordable shelter. In economic jargon, demand that can shift rapidly is called elastic, and demand that can't shift much despite changes in prices is called obviously inelastic. Demand to live in LA has been high due to historically mild climate, access to diverse array of amenities and geographies. I mean, you can go to the beach in the morning and go skiing in the afternoon. I think a central economics question in the aftermath of these fires, then, is, will rents and house prices go up enough to actually turn people away from the city?
Odeta Kushi - Well, that's a really important question. And, as we discussed on the last episode of The REconomy, home insurance premiums, a major cost of owning a home, have increased across the country, and you can bet that fire insurance premiums will be going up in LA after these fires. And we haven't discussed owned home prices at length on this episode, they also tend to increase along with rents in the aftermath of natural disasters. I think this raises the question, how high would prices need to go to push people away from LA to another city entirely?
Xander Snyder - That's a tough question to answer for me. It's hard to not compare the wildfires in Los Angeles to those that occurred in Lahaina Maui in 2023, both spread remarkably quickly due to high winds and unusually dry conditions, and both are markets with meaningful constraints in housing supply, albeit constrained for different reasons. A recent research paper by the University of Hawaii found that households affected by the Lahaina fires were paying approximately 43% more in rent for the same or smaller housing accommodations a year after the fire. However, it's worth mentioning that people who live on Maui full time have family and other close-knit connections on the island that make it more difficult to move away. That same research paper found that about 93% of people displaced by the Lahaina fires stayed on Maui and, of the remaining 7% that did leave Maui, 3% stayed in the state of Hawaii. This is strong evidence for highly inelastic housing demand in Maui, and can explain, to a degree, the severe increases in rent that have occurred there in the fire's aftermath. LA, however nice it is when it's not fire season, is a much easier place to leave, which could mitigate the impact of the supply shock on rents somewhat. As a result, I'd expect that LA's housing demand will be somewhat more elastic than Maui's.
Mark Fleming - Well, after the disaster ends, more detailed estimates will be made with the geospatial data that combines maps of burned areas with city zoning maps, but thanks Xander for putting together a first guess. Our hearts go out to the Angelenos everywhere, especially those who have suffered significant hardship as a result of these fires.
Odeta Kushi - That's right, stay safe out there. And thank you for joining us on this episode of The REconomy Podcast. If you have an economics-related question you'd like us to feature in the future, you can email us at economics@firstam.com. And, as always, if you can't wait for the next episode, you can follow us on X. It's @OdetaKushi for me, @MFlemingEcon for Mark, and @XanderSnyderX for Xander. Until next time.
Thank you for listening, and we hope you enjoyed this episode of The REconomy Podcast from First American. We're pleased to offer you even more economic content at firstam.com/economics. This episode is copyright 2025 by First American Financial Corporation. All rights reserved.
This transcript has been edited for clarity.