Wildfire risk doesn’t douse housing demand

  • New study found that real estate prices for homes in wildfire-prone areas fall immediately following a blaze but sale prices in risky areas rebound within one to two years.
  • Residential growth in forested areas across the United States — areas of landscape commonly referred to as the Wildland-Urban Interface (WUI) — significantly increased in recent years from an estimated 30.8 million housing units in 1990 to 43.4 million by 2010.

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That’s the conclusion of a new UNLV study which found that real estate prices for homes in wildfire-prone areas fall relative to homes in low-risk areas immediately following a blaze. But the effect is only temporary: Sale prices in risky areas rebound within one to two years.

While that may sound like a blessing to homeowners and real estate agents alike, UNLV research economist Shawn McCoy says the phenomenon may also pose somewhat of a curse.

That’s because homebuyers place such a significant premium on homes with the appealing views and beautifully isolating dense vegetation provided by mountainous high-fire risk areas that even media coverage of out-of-control blazes, mass evacuations, or deaths may not deter them. As a result, residential growth in forested areas across the United States — areas of landscape commonly referred to as the Wildland-Urban Interface (WUI) — significantly increased in recent years from an estimated 30.8 million housing units in 1990 to 43.4 million by 2010….

“Despite an initial drop in real estate prices in risk-prone areas, the results of our study suggest that homebuyers’ initial fears about fire risk will fade, and development in risk areas may continue to increase,” he said. “This is a problem: A lot of recent work shows that wildfires are not just a result of changes in global climates, but also rapid housing development into forested lands.”…

Shawn J. McCoy, Randall P. Walsh. Wildfire risk, salience & housing demand. Journal of Environmental Economics and Management, 2018; DOI: 10.1016/j.jeem.2018.07.005