Why Some Home Prices Rebound Quickly After a Forest Fire

A ruined view following a wildfire affects property values, but only because it's a painful reminder of risk, economists find.
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Firefighters struggle to contain backfire in the Pollard Flat area of California in the Shasta Trinity National Forest on September 6th, 2018.

Firefighters struggle to contain backfire in the Pollard Flat area of California in the Shasta Trinity National Forest on September 6th, 2018.

Economists know that the prices of houses tend to drop in the aftermath of a nearby wildfire. But a new paper reveals good news for those who have invested in vulnerable woodland property: Unless you can literally see the fire scar from your home, these prices rebound within a couple of years.

Shawn McCoy and Randall Walsh, economists at the University of Las Vegas and the University of Pittsburgh, respectively, unveiled these results in a recent paper, in which they analyze the effects of wildfires on the housing market in Colorado.

"When we focus on these areas that are close to the fire but can't see it, after the fire happens, you see a one- to three-year decrease in the price, and an increase in sales rate," Walsh says.

For houses that had a continued view of the destruction, Walsh says, the return to pre-fire prices took longer. In other words, homeowners who survive a fire soon cease worrying about the possibility of future fires—unless they're literally confronted with a dead forest every time they look out the window.

Perhaps more significantly, their paper shows that this ruined view is not the reason for the decline in house prices. Rather, McCoy and Walsh reveal that properties lose their value because residents briefly become more attuned to the risks of fire, rather than because their homes have lost beautiful forest views.

It's a distinction that economists had previously struggled to make, as their models didn't necessarily distinguish between those who lived within visible range of the fire, and those who simply lived in the area, but were shielded from the burn scars by, say, a ridge or a hill.

"When you see that negative impact on prices, it's hard to figure out if people have decided that this is a dangerous place because it's prone to wildfires, or is it because there used to be this beautiful green view, and now you're looking at this moonscape," Walsh says. "What we were trying to do with our study was try to understand how wildfires affect views about potential risk, and to do that through housing markets."

McCoy and Walsh based their analysis on fires that took place in the Colorado Front Range, and used data on housing transactions for residential properties between 2000 and 2012. But they also used geospatial data showing wildfire burn scars, and longitude and latitude information for each house in their sample. This approach allowed them to calculate whether residents could actually see the burnover from their house.

The researchers found that, in general, homeowners tend to become aware too late that they live in a vulnerable area and then seek to leave once a wildfire occurs. This pattern applied to even those who couldn't see the effects of the fire from their houses: An area previously attractive for its trees and animals is mentally transformed into an anxiety-inducing pile of fuel. Initially, at least, aesthetic concerns are negligible in decision-making, compared to the fear evoked by the fire.

But for those who are able to see the lingering effects of the fire, this mental anguish persists even after the flames die out. For those who can't see the impact, it soon becomes a case of "Out of sight, out of mind."

People who lived outside of the area when the fire occurred were even more impervious to the risks, the study found. Anxiety-ridden property owners looking to sell quickly found plenty of eager buyers, a fact illustrated by in the increase in property transactions following a blaze.

"Say you're moving from back East, which is wetter and isn't as fire-prone as Colorado—either you've relocated for your job, or for retirement—then you may not be that aware. Real estate agents are not always real forthcoming," says John Loomis, a professor at Colorado State University who has also written about the impact of wildfires on housing prices. (Loomis was not involved in McCoy and Walsh's study.)

As Americans become more vulnerable to wildfires, it is becoming increasingly important to understand what might drive this kind of behavior change. Part of Americans' increased vulnerability is due to decades of poor forest management and the effects of climate change; the other part of the story is that Americans are increasingly building their homes on the edge of forestland. As of 2005, some 39 percent of residential housing was located in this so-called Wildland-Urban Interface.

Despite the inherent risks of living next to flammable forests, there are ways that homeowners can reduce those risks and protect their properties in the case of a fire. By examining the mindset of people who have recently experienced a fire, the study highlights a window of opportunity for public agencies seeking to improve fire safety.

"It tells us that, right after these events, people are particularly susceptible to messaging. Maybe this is when we should be doing outreach to folks to create protective spaces around their homes," Walsh says.

Once a fire has burned through a forest in Colorado, the area is unlikely to witness another fire of the same magnitude for a while, since most available excess fuel has burned up during the event. Ironically, this arrangement could create some bargains for people who remain determined to live in the midst of nature in Colorado—if they can stomach the anxiety-inducing effects of living near a disaster zone, Walsh says.

"I used to live not far from a lot of these fires. If I was going to buy there again, [I would] find a place that doesn't have a view of a burn, that's really close to a big fire that just happened. You'd get a great deal," he says. Even so, he doesn't believe he'd be exempt from the psychological effects that his paper describes. "I think it would still make me worry about fire, even though I knew the risk was lower because of that fire. Just that reminder, I guess."

New Landscapes is a regular series investigating how environmental policies are affecting communities across America.

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