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Tuesday, Sep 26, 2023

Smaller Builders to Benefit as Insurers Settle With Displaced Homeowners

It’s hard to remain optimistic or see any positive aspect in the fires that have ravaged San Diego County.

Too many homes were destroyed, too many firefighters were injured and too many San Diegans were displaced.

However, there’s a silver lining once the smoke clears.

University of San Diego economist Alan Gin said while the loss is estimated at $1 billion, economic indicators in San Diego will perk up as a result of the fire.

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“Through the perverse world of economic accounting, sometimes national disasters turn out positive for the economy in the sense that you have to spend money to rebuild,” said Gin, who compiles the USD Index of Leading Economic Indicators for San Diego County.

Gin anticipates increased economic activity, including job growth in construction jobs and more construction starts on residential and commercial properties and repairs on damaged properties.

An estimated 1,500 homes in San Diego County have been lost due to the fires, according to the Office of Emergency Services. More than 100 other commercial structures were also damaged, and will need to be repaired or replaced, according to OES.

“There will be a lot of money funneling in from insurance settlements and that will help finance some of the construction,” Gin said.

While homebuyer and investor confidence may be mildly and temporarily impacted, Gin said he did not think the fires will have a negative, long-term impact on consumer confidence.

The current housing slump in San Diego has caused the loss of 5,000 construction jobs compared to a year ago, said Gin. Many of those will head back to work to help rebuild and repair the damages, he said.

Optimistic Outlook

Gary H. London, president of San Diego-based The London Group Realty Advisors Inc., forecasted an increase in construction industry jobs. London, moreover, predicted increased real estate values after the rebuild and benefits of more modern infrastructure.

“What will come out of this will undoubtedly be more modern, bigger, higher value real estate, that is what we saw in Scripps Ranch after the Cedar Fire,” he said. “People built bigger homes, more modern homes and ultimately increased valuation.”

Ada Kaiser, principal with the San Diego office of Meyers Builder Advisors, forecasted an increase in business activity for builders, particularly for smaller general contractors and custom homebuilders to rebuild or repair one home at a time as insurance money and federal funding reaches those affected. She did not anticipate seeing a substantial jump in activity for larger homebuilders, who typically build numerous homes at a time.

“It is not (large homebuilders’) specialty at all,” she said. “I don’t see many of them being able to do it or wanting to do it.”

National homebuilder Brookfield Homes does not expect to increase home construction as a result of the fires.

“Our business is not to build one home at a time,” said Steve Doyle, president of the San Diego/Riverside division of Brookfield Homes.

Doyle said national or larger homebuilders’ business model is to build numerous homes with similar site plans on adjoining parcels, not custom homes one at a time throughout a city.

He said San Diego has a number of private homebuilders and general contractors who will pick up most of the rebuilding business.

“That is what they are set up to do, that is their business and they will do most of the work,” he said.

Assistance Programs

Following the Cedar Fire, Brookfield Homes created several programs to assist displaced residents find new homes. Programs included the purchase of destroyed lots to provide landowners a down payment on a new home. Nearly a dozen families used these programs.

The local Brookfield Homes office was closed during most of last week due to the fires and all construction stopped at its developments across the county. It was just one of thousands of businesses that closed temporarily, and city offices, schools, retail centers and other offices were put on hold.

The San Diego offices of Pardee Homes and Shea Homes were also closed for several days last week.

Mary M. Lydon, executive director of the San Diego/Tijuana chapter of the Urban Land Institute, said the fires spark questions regarding sustainability practices, planning and land use. The ULI is a nonprofit research and education organization dedicated to land use, real estate, housing, transportation and urban development issues.

“This is an opportunity for us now to look at how we are building ask what are the sustainability methods that we could use to build in our unique region surrounded by canyons, the ocean and mountains,” she said.

The rebuilding of thousands of homes and dozens of businesses will be slow, according to several local real estate experts. The slow return will also place pressure on the rental market.

Kaiser predicted the rental market to pick up because of the large number of evacuees that will find themselves without homes.

“Economically, the rental market will pick up again by all of the people who are displaced,” she said.


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