Fire-Ravaged Properties In Pacific Palisades And Altadena Selling For 50% to 70% Less Than Their Peak Value

Property owners whose homes were damaged or destroyed by the fires in Los Angeles' Pacific Palisades and Altadena find themselves facing an impossible choice. Rebuild and expose themselves to the risk of another fire or sell their properties for between 50% to 70% less than their peak value before the blaze. 

A recent article in Newsweek profiled the dilemma facing local homeowners. What used to be a four-bedroom home in Palisades, but is now little more than a burn site, sold for $1.54 million in 2005. According to Newsweek, the property's peak value was $2.7 million, but the current owners listed it for just $999,000. Incredibly, the property received more than 60 offers and sold for over $1 million. 

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Newsweek also referenced Redfin data showing the median home value in Palisades to be $3.3 million at the end of 2024. The fact that the owner got over $1 million for a burned-out lot illustrates the enduring appeal of areas like Pacific Palisades. However, it's still a dramatic fall-off from the home's peak value and it's quite likely that many more homesites in the burn areas will be selling for similar discounts in the future.

Newsweek quotes Bloomberg Businessweek podcast co-host Tim Stenovec as saying the homeowner "is getting much less than the home’s pre-fire value rather than waiting to rebuild on the property that she’s owned for 20 years.”  It's also worth noting that the $1 million the owner of the Palisades Property received will not go nearly as far in today's Los Angeles real estate market as it did 20 years ago.

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A recent housing affordability survey by the National Association of Realtors showed a median home price of over $900,000 in the Los Angeles area. That means the former owner of this Pacific Palisades home has enough buying power to purchase an average house in Los Angeles. If they stay in LA, their next home will not be nearly as nice as the one they lost unless they have other financial resources to contribute.

There is also no guarantee that homeowners who sell out for less will be able to keep all the money they receive after selling at a loss. Many of the burned-out properties in Palisades and Altadena had mortgages on them, meaning property owners would have to pay off the outstanding loan balance out of the sale proceeds. Speaking of Altadena, the picture isn't much prettier for homeowners there either.

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Newsweek also profiled a burned property on a 9,100-square-foot lot in Altadena. The property is currently listed for $449,000, which is almost 50% less than the $965,000 the current owners paid to buy the property in 2023. Although there will be no shortage of real estate investors flocking to Pacific Palisades and Altadena to snap up distressed properties at a discount, the picture for the current owners is much less clear.

Perhaps the only guarantee is that owners of destroyed and damaged properties face several months, or even several years of haggling with insurance companies about the claim payouts. They'll have to do all that while deciding whether to rebuild, where to go, and when to do it. It's the very definition of a Catch-22.

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