Homeowner Jenny Hess says the great weather and calm environment are two of her favorite things about living in California—except when she’s worried about wildfires or running out of water. Hess fled New York City at the height of the pandemic last year to find solace in California, and although a wildfire nearly burned down her sister’s home a few months later, Hess decided to purchase a $2.295 million three-bedroom home shortly after. The Wall Street Journal reports that home sales often pause during and right after wildfires, but always pick up again a few weeks later. And sales in the state's wine country reached record highs during the second quarter of 2021.
Napa’s median price was $900,000 in the second quarter of 2021, up 23% from $695,000 in the second quarter of 2019, while Sonoma’s median price rose 17% to $785,000 during that same period, according to data from the MLS. Sales are particularly strong on the high end: In Napa, 57 homes sold over $2 million in the second quarter of 2021 compared with 17 in the second quarter of 2019.
“It’s astounding,” says Randall Bell, CEO of Landmark Research Group, which analyzes real estate after cataclysmic events.
Real-estate analysts say the market is being driven by the same pandemic demand, rising stock market and low mortgage rates that are fueling real estate elsewhere in the country. The wildfires just add another element to the equation by exacerbating the shortage of supply, as displaced homeowners seek a place to live. There is also a lack of available contractors to build new stock, says Frank Nothaft, chief economist for CoreLogic. The disruption of construction and the rising cost of building materials only adds to the pressure on home prices, he says.
Psychology also plays a role. “So far, people have a short-term memory regarding natural disasters,” says Patrick Carlisle, chief market analyst in the San Francisco Bay Area for Compass.
Before the pandemic, prices in Napa and Sonoma were rising, but not as fast as the core counties of Silicon Valley, where the high-tech boom was centered, and the adjacent and much more affordable counties like Alameda, says Mr. Carlisle. The pandemic changed those dynamics, with inner-county residents moving to more rural and suburban counties, some of which were then hit by terrible fires, he says.