How the LA Wildfires Set The Housing Market Ablaze

When devastating fires tore through LA County on January 7, they didn’t just destroy homes — they set the entire housing market on fire. Over 1,000 residents were suddenly left homeless, many of them from affluent neighborhoods like Malibu, Pacific Palisades, and Topanga. In a region already battling a severe housing shortage, this disaster didn’t just add fuel to the fire — it created a full-blown housing frenzy.

Housing Shortage Becomes Housing Crisis

Before the fires, LA County’s housing market was already stretched to its limits. Vacancy rates were low, rents were sky-high, and competition was fierce. But overnight, hundreds of wealthy families were suddenly part of LA’s growing homeless crisis — an ironic twist in a city already infamous for its lack of housing.

LA County’s Luxury Rental Market

Between January 15 and the end of February, a staggering 268 rental homes priced above $6,000 per month leased in less than a week, with many going for far above asking price. The luxury rental market — once sluggish in certain areas — exploded overnight.

Take 714 12th Street in Santa Monica. It sat for 141 days at $27,500 per month, only to lease on January 15 for $50,000 per month — a shocking 82% over asking.

Luxury homes that had once languished on the market were suddenly being snapped up in days, triggering bidding wars reminiscent of 2021’s peak pandemic frenzy.

Price Gouging or Just Market Forces?

California law limits rent increases to 10% following a declared disaster, but in the immediate aftermath of the fires, some landlords tested the limits. One strategy was offering 366-day leases — a technical loophole intended to sidestep rules on short-term rentals, which previously applied only to leases under a year.

However, on February 4, Governor Gavin Newsom shut down this loophole, clarifying that any rent increase above 10% — regardless of lease length — would be considered illegal price gouging.

In the same executive order, Newsom exempted 24 luxury-heavy zip codes — including parts of Bel Air, Beverly Hills, and Brentwood — allowing newly listed, larger single-family homes with four or more bedrooms to sidestep price-gouging restrictions altogether.

This selective carve-out created a luxury free-for-all, with wealthy families willing to pay almost anything for housing. And it wasn’t just rentals — the for-sale market erupted too.

Sales Market Frenzy

With rentals scarce and uncertain, many fire-affected homeowners turned to buying — fueling bidding wars for move-in-ready homes.

Some sale prices were shocking, such as 10380 Dunleer Drive, listed at $2,975,000, sold for $6 million to a family displaced from Pacific Palisades. In Santa Monica, 463 17th Street listed for $7,850,000 and sold in five days for $10 million, and 628 10th Street, asking $8,795,000, closed at $11.2 million — a 27% premium.

Neighborhoods like Westwood, Bel Air, Marina del Rey, and Venice saw the same feeding frenzy, particularly in pockets where buyers were willing to pay top dollar to stay close to their kids’ schools and community ties.

Displacement Without Demand

So far, the lower-end rental and single-family markets haven’t seen the same surge in demand. Many lower-income families affected by the fires are hunkering down with relatives or friends, stuck in limbo as they navigate the long and frustrating process of insurance claims, rebuilding approvals, and government red tape.

The Ripple Effect: Orange County, Palm Springs & Beyond

While the immediate firestorm played out in LA, the ripple effect is spreading fast. Retired homeowners who don’t have the wherewithal it takes to rebuild are heading for Palm Springs, swapping coastal mansions for desert estates. Meanwhile, families with school-age kids, desperate for safety, stability and strong schools, are relocating to communities in Orange County.

This trend is already showing up in cities like Newport Beach, Irvine, and Laguna Beach, where several families from fire-ravaged areas have already enrolled their children in local schools.

As families from LA relocate in search of safe, stable communities with top-rated schools, Orange County’s housing market will face steady upward pressure. Unlike the immediate shock in LA, OC is seeing a slower, more gradual migration — but many of these families are arriving with significant purchasing power, driving up prices and competition. As home prices climb, affordability for first-time buyers will slip further out of reach, keeping more people in the rental pool longer, tightening inventory, and pushing rents higher over the next 12 to 24 months.

A New Era for Southern California Real Estate

The January fires didn’t just destroy homes — they reshaped the housing market across Southern California. In LA, luxury rentals and move-in-ready homes are commanding unprecedented premiums. In Orange County, a quieter but lasting shift is underway as families seek safety, stability, and top schools.

This isn’t a passing bubble — it’s a deeper shift driven by scarcity, unpredictable regulations, and the fundamental need for community and security. With climate disasters becoming more frequent, this may be just the first chapter in a larger story about where Southern Californians choose to put down roots.

Written by Mercedes Shaffer, Broker

Mercedes Shaffer is a multifamily broker with REAL, and If you have questions about buying, selling or doing a 1031 exchange, her team serves LA and Orange County and can be reached at 714.330.9999, InvestingInTheOC@gmail.com, or you can visit their website at InvestingInTheOC.com  BRE 02114448