Monday, Oct. 29, 2007 | The fires that have swept the region, and that still burn in some places, have been incredibly dramatic in their impact on the day-to-day functioning of our city and have been absolutely devastating to those families who lost their homes. But when people have asked me in recent days how I thought the fires would impact home prices, my answer has been that it wouldn’t have much effect at all.
It’s simply a matter of scale. San Diego is a huge city and — without minimizing the catastrophic impact to those involved — the number of homes destroyed represents an extremely small portion of our housing stock.
The latest estimate I’ve gotten from the U-T’s fire blog as I write this is that 1,470 homes have been destroyed. According to SANDAG, 1,470 homes represent just 0.13 percent of San Diego’s total housing supply. I imagine most of the homes burned were single family homes, but even still, the number of homes destroyed accounts for just 0.22 percent of all single family homes in San Diego.
Of course, pricing impact would result more from changes in for-sale inventory than in the overall housing stock. Here too, though, the fire’s impact is minimal. If immediately replaced from resale inventory, the homes destroyed would in their entirety use up just 11.1 percent of single family homes currently listed for sale. This would just get the amount of inventory back to where it was in May — not a significant change and not anything that would change the market’s prevailing trend.
It’s instructive to look at how the loss of these houses would change the relationship between supply and demand. In September, there were 12.2 months’ worth of single family homes listed for resale. This means that at last month’s pace of sales, it would have taken 12.2 months for every home to be purchased. An immediate removal of 1,470 homes from the inventory would reduce the amount of inventory to 10.8 months’ — still quite a bit worse than anything we’ve seen in years. The difference between 12.2 months’ worth of inventory and 10.8 months’ simply doesn’t amount to much. Both figures are ominous for pricing; one is just slightly less so.
I will throw out one last figure. North County real estate broker Jim Klinge informs me that 7,835 homes listed for resale are currently vacant. (This figure counts both single family and attached homes). Every family that lost a home could move into one of these residences and there would still be 6,365 empty homes in San Diego waiting to be sold.