By RICHARD LOMBARI | Contributing Writer
In the aftermath of the recent Palisades fire, the landscape of real estate in the area has changed dramatically. While the standard factors that influence land value—location, views, lot size and proximity to town—still apply, they no longer tell the full story. In a post-disaster environment, new considerations emerge that significantly impact property values, making it essential for buyers, sellers and investors to look beyond traditional real estate principles.
One of the most important factors in determining land value after a wildfire is the extent of destruction in the surrounding neighborhood. In areas where only a handful of homes burned, the rebuilding process will likely be smoother and property values may recover quickly. However, in neighborhoods that suffered widespread devastation, the reality is much more complex.
Large-scale reconstruction efforts will lead to prolonged construction congestion, with heavy machinery, noise and road closures becoming part of daily life for years. This alone can deter potential buyers who may be unwilling to endure the disruption.
Another significant issue is that not all homeowners will rebuild immediately. After receiving insurance payouts for their structures, some may choose to hold onto their vacant lots rather than start construction, either as an investment or due to the overwhelming costs of rebuilding. This can result in patchy redevelopment, where some homes rise quickly while others remain empty lots, impacting neighborhood cohesion and long-term desirability.
The history of what stood on a lot before the fire also plays a crucial role in valuation. Two identical parcels may be priced very differently depending on the size and style of the home that previously occupied them.
The city of Los Angeles has implemented streamlined permit approvals to encourage rebuilding, but with a major caveat: Homeowners can only expand their previous home’s size by 10% to take advantage of the expedited process. Those who wish to build larger structures will likely face significantly longer permitting delays, particularly given the overwhelming demand for approvals following a fire of this scale. This means that a lot that previously housed a large estate may be more valuable than one where a smaller home once stood, simply because it sets a precedent for a larger build.
The Mansion Tax factor will discourage builders and developers from buying homes even at the already reduced values. Measure ULA, dubbed “The Mansion Tax,” implemented in April 2023, imposes a 4% transfer tax on property sales over $5 million and a 5.5% tax on those exceeding $10 million.
This additional tax burden can discourage potential buyers, especially developers and investors, from purchasing high-value lots, as it dramatically increases transaction costs. This financial deterrent could slow the pace of rebuilding and redevelopment. As a result, land values may be affected, with some investors opting to wait or redirect capital elsewhere, despite ongoing demand for prime coastal real estate.
Environmental concerns may delay major influx of buyers. Beyond zoning and permits, environmental concerns add another layer of complexity. The intense heat and loss of vegetation due to the fire may have compromised soil stability, increasing the risk of erosion and requiring additional geotechnical work before rebuilding can even begin. Older homes that burned may have released toxic materials, necessitating costly cleanup efforts. Families may delay buying lots to build on while other lot sites are removing potentially toxic debris.
Additionally, insurance is now a major concern for homeowners in Pacific Palisades, with many seeing dramatic increases in premiums—or, in some cases, struggling to secure coverage at all. The cost and availability of insurance will have a direct impact on future land values, as buyers weigh the long-term financial burden of rebuilding in a fire-prone area.
The Pacific Palisades real estate market is also experiencing a shift in buyer priorities. Homes and lots that offer defensible space, fire-resistant landscaping and upgraded building materials will be more desirable in the years to come. The character of neighborhoods may also change, with some longtime residents returning to rebuild, while others sell to investors or developers. These shifts will shape the community’s recovery and influence property values well into the future.
Ultimately, the impact of the Pacific Palisades fire on land values is multifaceted. While traditional factors like location and lot size remain relevant, the realities of rebuilding, neighborhood recovery, environmental hazards and insurance challenges all play a role in determining what a property is truly worth.
For those navigating this uncertain market, the key question isn’t just what a lot is worth today—but what it will be worth in five or 10 years as the area rebuilds. The long-term value of fire-affected properties will depend on how quickly the neighborhood recovers, how well new homes are designed to withstand future risks and how the community adapts to the new realities of living in a fire-prone region.
Richard Lombari, a displaced Pacific Palisades resident, has been a real estate broker for over 30 years, an author, a speaker and a real estate wealth advisor.
