One of the dilemmas with writing an article a week or so before publication is that you can say things or use a jocular tone that later on becomes painful to read due to intervening events. Last month’s article was one of those for me due to the Marshall Fire happening after I sent my article to BOLO and you reading that article in mid-January. I lost my home in the fire and feel for everyone else that has lost their home as well as everyone that has homes still standing but damaged in the fire. For this article, I want to briefly touch on the real estate market effects I expect to see from the fire. We’ll get to looking at year end 2021 facts and figures in future issues.
To me, the first overall effect is that we had around 1,100 homes removed from the roll of homes in Boulder County for the next 2-4 years with an unknown additional number of homes temporarily removed due to fire damage or smoke impacts (I’ve heard estimates ranging from 150 to 600 damaged homes). Let’s call this 1,500 households, with multiple people per household, with an immediate need for replacement housing. This new group of tenants has had a major impact on the rental market, absorbing most available rental properties, Airbnb’s, VRBO’s and hotel rooms within a 30-minute commute and the majority of these people will be in those rentals for the next 2-3 years. Rental lease rates will rise and vacancy rates will remain very low. We may see people who initially travelled further away to find a replacement home try to make it back closer as the rental market opens up more in the summer. Hopefully the isolated cases of rental price gouging are prosecuted and remain a small aberration in the market.
The resale market effects of the fire break down along the lines of three groups that I think exist amongst people directly affected by the fire. The first group is, I believe, a relatively small group. These people have the personal or familial financial resources available that allow them to immediately go buy a replacement home to move into while their burned/damaged home is rebuilt/repaired. This group is already having an impact on our showing traffic and added an extra boost of buyer demand to an already competitive, very low, available inventory start of the year. I would expect the impact of this group to be a relatively short-term impact that maybe lasts through summer 2022.
The second group, of which I am a member, is the largest group. We lost our homes or have heavy damage and are mired in the middle of a long process of insurance compensation and eventual rebuild, remodel, and/or repair. Being a member of this group, I can personally say that this group has very little idea of what we are doing for the immediate future. We’re just starting to figure out what insurance proceeds we’ll receive and how far those proceeds will go towards our recovery process. Whether we eventually move back into our recovered homes or decide to sell them, the impact to the market is at best, 24 – 36 months away from today.
The third group, which I fervently hope is very small, contains people that will not be able to recover from this fire financially or emotionally. This group will be taking the pitifully small insurance payouts being offered, opting not to rebuild and walking away with losses in the hundreds of thousands of dollars. Some members of this group will have such small payouts that they will not be able to pay off their mortgages and bankruptcy/foreclosure will be their sole relief. Eventually the properties of this hopefully small group will be sold as vacant lots which will be rebuilt upon. A really good developer, with existing plans and a network of sub-contractors, may be able to have a finished home to add to our market as available inventory 18-24 months from now.
So, my thinking is that we’ll see tight rental market conditions for the foreseeable future. We’ll see a short-term boost to the resale market and then longer-term effects almost two years out where maybe we start seeing new, rebuilt homes adding to our inventory levels above and beyond other market trends.
Stay strong everyone. Our area has a long road ahead with insurance and rebuilding issues but we will come out the other side stronger and better!