Hope and homebuyers return to Paradise
In November 2018, the deadliest fire in the history of California nearly destroyed Paradise, a 144-year-old town that sits in the Sierra Foothills above the northeastern Sacramento Valley.
When the smoke had cleared, Camp Fire left tens of thousands of people displaced, 86 persons dead and 18,804 buildings destroyed. Paradise bore the brunt of Camp Fire’s destruction.
“Every home, every little business, there were a few that made it along the main streets, but other than that, at least 95-98% of the residential housing in the area was gone,” local eXp Realty agent Mike Stearns said.
The loss of housing and businesses resulted, expectedly, in a mass exodus from the town. Prior to the Camp Fire the population of Paradise was nearly 27,000. By the end of 2019, just 4,608 people called the town home,
However, by early 2021, the population was already rebounding, with roughly 6,000 people living in Paradise.
In fact, Paradise’s housing market, though constrained by unresolved wildfire litigation and issues like proper home insurance, even has the high-demand, low inventory problems of most other U.S. cities.
“From what I gather, it seems to be about half are people who already or previously lived here pre-Camp Fire and the other half are from out of the area,” local Fathom Realty agent Douglas Speicher said. “We currently have about 33 stick and manufactured homes active on the market and 103 active lots. We have had over 200 lots active on the market at one time since 2019, so we are a little low on inventory.”
One key factor in the Paradise market, Speicher said, is the pending results of a class action lawsuit filed against utility giant PG&E.
After the fire, the price of PG&E’s shares tumbled and in early 2019 the company, which provides gas and electricity to the vast majority of Northern California homes, filed for Chapter 11 restructuring bankruptcy.
In 2020, as part of its plan to exit bankruptcy, PG&E agreed to fund a $13.5 billion trust to compensate the nearly 70,000 individuals who lost homes, businesses and family members in fires linked to its equipment.
As of July of this year 3,300 people, or less than 5% of the individuals impacted by the fire, had received such compensation. The money in the fund is tied to the company’s stock value. If PG&E’s share price goes down, as it did in June when the company disclosed its equipment may have started this summer’s Dixie Fire, victims may not receive compensation money.
On the advice of their lawyers, Speicher said, Many homeowners are waiting for the lawsuit to settle before they sell.
While homeowners are still dealing with the last major fire, they seem not terribly concerned with the next one, or at least not concerned enough to pass up affordable California housing.
In November, the median sales price in Paradise was $437,500, an 8.8% year-over-year jump thanks to increasing demand and lower inventory, according to Redfin.
Those prices are higher than the national median home price of $357,000 as of November, per the National Association of Realtors.
Prices, though, remain 44% below the statewide median home price of $782,480 in November 2020, according to a California Association of Realtors report.
“I think that [the threat of fire] is the biggest hurdle in getting people to go back or getting new people to the area,” Shane Collins, a RE/MAX agent in the neighboring city of Chico said. “The people who do end up buying here, it is slightly more affordable and that kind of pushes them into deciding to buy here.”
But prospective home buyers are still facing a competitive market.
“Properties are sitting a week or two before they get offers at the moment. They are generally generating a few offers, but typically not more than five,” Speicher said. “On the easy to build on vacant lots, which generally are priced based on size and ease of building, we seem to be getting anywhere from three to 10 offers.”
Local agents are slowly seeing new construction listings pop up.
“The problem is that it costs more to build a house than you can sell it for,” Stearns said. “People are rebuilding homes for about $350 per square foot, but you can sell them for barely $300 per square foot. Plus, they are trying to limit the number of manufactured homes, But, really, those are the only things that can get built because there are no contractors, everyone is already busy. So, it’s coming along, but it’s a slow process.”
According to Speicher, buyers, regardless of whether or not they are new to town, prefer the new construction homes or lots.
“Generally, the newer builds have way better ratings for fire safety and all around energy efficiency,” Speicher said.
Prospective homebuilders are subject to specific building codes and standards that result from Paradise being located in a Wildlife Urban Interface area. These include using non-combustible materials for roofing, exterior walls and siding, as well as having vent openings capable of resisting the intrusion of flames or embers.
“We are seeing some unique construction homes return, but the conventional stick built is the common theme that we are seeing comeback,” Speicher explained. “We are also seeing a handful of insulated concrete from homes come on the market and they have a very high fire risk durability.”
In addition to checking the regulatory compliance of a new build, Speicher recommends that his clients consider how many routes there are available to get away from the home, and what the neighboring parcels are doing for preventative maintenance.
“You can do everything under your power to protect your property, but if the neighbors aren’t then it’s not going to be good,” Speicher said. “So is there a lot of vegetation that hasn’t been cleared or are there still dead, burned trees? Those are really big things because defensible space makes a huge difference in being able to fight future wildfires.”
Prospective homebuyers must also consider the cost and availability of fire insurance.
“Fire insurance is currently not widely available through traditional carriers, so people are having to use the government program, the California FAIR Plan, which can be anywhere from $3,500 to $5,000 a year,” Collins said.
Speicher also noted that while low-cost fire insurance may be available through a traditional carrier on one property, that doesn’t mean it will be available at a neighboring parcel.
“What one home can qualify for, their neighbor very well might not,” Speicher said. “I recently sold a home where the neighbor had just bought a few months prior and their insurance premium was about $1400 a year, but the parcel next door that I sold, with the exact same house plan by the exact same builder, had to get insurance through the FAIR plan that was $3700 a year.”
Local agents have hope that the town, and its real estate market, will continue to comeback in the new year.
“We’re seeing a lot of people want to return to Paradise, whether they had decided to relocate out of area or just down to Chico, a lot of people are selling the homes they purchased in Chico to move back to Paradise now,” Speicher said. “In the last six months there seems to be almost a new wave of hope.”
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