T
he scale of devastation from the wildfires in Los Angeles County is staggering, with over 12,300 structures destroyed, according to Cal Fire. The areas most affected include Pacific Palisades and Altadena, where entire neighborhoods were decimated by the fires. Loss estimates are still rising, but analysts predict insured property losses of up to $40 billion, making it the largest wildfire insurance industry loss event in history.

    Rebuilding will be a massive undertaking, with individual homeowners facing varying costs depending on the size and nature of their new home. In Pacific Palisades, homes were listed at a median price of $4.7 million last month, but much of that value was in the land itself. Land values account for an extremely high share of home value in Los Angeles, making up about 78% of total property value.

    Using market values as a guide, a rough estimate suggests that rebuilding a home could cost around $947,000 in Pacific Palisades and $262,000 in Altadena. However, these estimates do not include the cost of debris clearing and site remediation, or repairs to roads and utility services needed to make the affected areas habitable again.

    Insurance coverage will vary depending on policy limits, but standard homeowners and renters insurance in California typically covers damage from smoke and fire. Homeowners with insurance can expect some relief, but it's essential to know the specifics of their policy. Some major insurance carriers have canceled policies in the affected areas due to unsustainable climate risks, leaving residents with limited options.

    To expedite the rebuilding process, state and local officials have rolled back building regulations, waiving environmental permitting and review requirements. Los Angeles Mayor Karen Bass has issued an executive order expediting the local building permitting process for up to a decade out. While these measures aim to speed up the rebuilding process, it's unclear how many residents will choose to stay and rebuild following the trauma of losing everything.

    As the rebuilding process begins, housing prices may become more expensive due to supply and demand fundamentals, leading to spikes in rent, especially in areas near but not directly affected by the fires.