Fierce winds have been blowing through San Diego’s housing market. First, local real estate had been part of the national slump, with sharp slowdowns in construction and blunt drops in prices. Then, in October, Santa Ana winds spread wildfires that burned 1,500 homes in the city’s suburbs.
The aftermath is a tangle of construction and insurance. On the construction side, the devastation of the fires came with a silver lining: Rebuilding the burnt homes would be a boost for the local homebuilding industry. From a high of 9,750 new single homes built in 2002, construction has waned to fewer than 4,000 this year.
“Even if people elect to walk away, someone is going to rebuild on the lot,” said Tom Bliss, a realtor with Century 21 in San Diego. “It’s not easy to find land here to build anymore, and people will continue to build in areas likely to burn, because for the most part, that’s all of San Diego.”
On the insurance side, the story of J.P. Lapeyre is typical. Lapeyre, a San Diego resident, lost his home to a previous wave of devastating wildfires in 2003. He subsequently received $168,075 from his insurers to rebuild — less than half of the estimated reconstruction cost of $448,000.
Using insurance money and a second mortgage, Lapeyre rebuilt his home on the same lot.
Last month, for the second time in four years, wildfires forced him to evacuate. In the end, the fire narrowly missed his neighborhood.
He’s lucky; this time, he knew he wasn’t fully insured.
Guaranteed home-replacement policies have been uncommon in California since the earthquakes and wildfires of the 1990s. As a result, while some policies offer inflation-riders or extension policies to buffer the replacement price, most in the state limit construction.
“We essentially bet against nature, and sometimes we lose,” said Bill Korogi, a San Diego-based insurance broker. “We want to help, but not everyone can afford or qualify. We’re not miracle workers.”
Following San Diego’s 2003 disaster, only 46 percent of destroyed homes were rebuilt. County officials say that 54 percent of affected homeowners were uninsured. Four years later, many of the parcels still look like ashtrays and are cluttered with “For Sale” signs.
Allstate Corp., the nation’s second-largest property-casualty insurer, announced earlier this year that it would no longer underwrite new California homeowner policies, citing risks from wildfires and earthquakes. The company is also seeking a 12 percent rate hike for its existing customers.
Of course, not all homeowners are as unswervingly devoted to suburban living as Lapeyre. Brokers say that in the last few weeks, interest in downtown condos has been brimming. Prices have gone down about 10 percent in the last year, according to brokers; some refugees from the fires see this as a reliable moment to switch from suburban to downtown living.
“We’ve seen about a 10 percent increase in people looking to buy in downtown,” said Brett Schaffter, a salesperson with Bosa Development Corporation in San Diego. “I think the fires gave a lot of people another reason to move to the downtown area.”
He said, “We have nine upscale [condo] towers, and people we are talking to are saying that they were either affected by the fires, or they know someone affected by the fires.”
Sadly, the problem of wildfires isn’t relegated to San Diego’s suburban fringes. According to the United States Forest Service, much of San Diego outside the downtown area is arid scrubland and is at risk of wildfires. During the October fires, even neighborhoods one block from the ocean were briefly evacuated.
In response, in early November, the House of Representatives passed the Klein-Mahoney measure. The legislation would oblige the federal government to lend billions of dollars to states to boost payments to homes and businesses damaged by natural disasters. Saying it takes business away from private insurers, President Bush has indicated he will veto the bill.
But even if the measure passes, it will come too late to assist homeowners struggling to rebuild or move elsewhere in San Diego. Many residents are still in limbo.
Jill and Hector Ruiz lost their home in the Ramona neighborhood last month and are still waiting for news regarding their insurance coverage.
“We were covered, and we were issued a small check to find a place to stay, but now comes the haggling,” Jill Ruiz said. “We’re going to rebuild, and we have [construction] people calling us making bids left and right, but we can’t make any commitment until we find out how much we’ll end up with. I thought I was covered completely, but apparently not. This has been like adding insult to injury, and we’re pretty upset.”