Editor’s note: After the initial concerns of rescuing people from natural disasters like Hurricane Katrina, the next big question is over the recovery and rebuilding process, which has already begun in Katrina-ravaged areas. In this three-part series, we look back to the rebuilding process after the Oakland Hills fire in Northern California in 1991, Hurricane Andrew in South Florida in 1992, and the terrorist attacks of Sept. 11, 2001, in downtown Manhattan. We examine the damage in each case, what happened to the local real estate markets in the short-term, and what’s happening today. (See Part 2: Real estate rebirth after hurricanes and Part 3: Downtown Manhattan real estate bounced back.)
The Oakland and Berkeley hills of California burned on Oct. 20, 1991, and firefighters could do little to stop the fast-moving firestorm.
Heat from the blaze was so intense – reaching up to 2,000 degrees – that it disintegrated tires and melted metal, mowing through house after house and killing 25 people, including a firefighter and a police officer. Another 150 people were injured in the inferno, which destroyed 2,449 single-family homes and 437 apartment and condominium units. The Oakland Hills Fire spread over 1,600 acres and caused an estimated $1.5 billion in damage.
High winds initially fueled the fire, which grew quickly to create its own wind effects. Thick vegetation, narrow roads, high winds and steep slopes contributed to the fire’s rapid spread. The fire wasn’t contained until three days after it began, and it was finally controlled on the fourth day. The disaster left a moonscape of charred, barely recognizable home foundations set in barren, blackened slopes.
Since those dark days, the Oakland and Berkeley Hills have come alive with homes again. But the character of the real estate there has changed dramatically. The area’s older, smaller homes, some of which had wood-shingle roofs, have largely been rebuilt as super-sized homes that sell for more than $1 million.
John Holmgren, owner of Holmgren & Associates mortgage brokerage in Oakland, said the local real estate market had reached a cyclical peak in the middle of 1989, prior to the Loma Prieta earthquake that rocked the Bay Area on Oct. 17, 1989. The earthquake, he said, was the “first precipitating event for the downward real estate market.” Mortgage interest rates were in double digits at the time, and there were other local economic factors that shook up the real estate market prior to the Oakland Hills Fire.
He noted that many of the people whose homes burned ended up selling. “A lot of people sold their lots very rapidly,” he said.
Some homeowners took their insurance settlements quickly, while others held out for larger settlements. The Firewise.org Web site, which contains information supplied by a consortium of federal wildland fire agencies, reported that 30 percent of homeowners who lived in the burned area chose not to move back and rebuild.
Steps were also taken to improve the supply of water to assist firefighters in the event of another disaster, and some building codes were heightened in the fire area to help reduce fire risks.
The firestorm brought on a wave of litigation, and 53 local lawsuits sprang out of the ashes, Firewise.org also reported.
Marlene Daniels Bottano, broker associate at Prudential California Realty and past president of the Oakland Association of Realtors, said the fire actually led to booming real estate sales in the region as victims of the fire bought homes elsewhere.
“Everything that was on the market at that time sold immediately because people wanted a place to live and wanted to keep their children in the same schools. There was an incredible rush on the market to purchase everything and anything that was available,” Bottano said.
Area real estate agents worked with their clients at the time to ensure that they had adequate insurance protection for their homes, she said. Bottano said she encourages homeowners in fire areas to periodically review their insurance policies to make sure their coverage is adequate.
“It was very tough to get insurance for our clients (at first),” she said. “The first couple of years were very difficult.” The area’s real estate market began to gain steam within three years of the fire, she said.
Bottano estimated that about 30 percent of the residents who lost their homes to the fire decided to rebuild there, and she said there was some investor activity following the fire. “We did have a number of investors who came in, and it really changed the profile of a lot of those homes. The new homes built in the area are quite a contrast to the earlier assortment of older Craftsman and cottage-style homes, she said.
“They really took a lot of them to the max as far as zero-lot homes,” Bottano said. “They built these mega-homes.”
Some buyers in the Oakland and Berkeley hills real estate market are local people who are looking for a step up, she said, and the area also has some out-of-town buyers, including corporate transferees.
Mary Jane McConville, a Realtor for Montclair Better Homes, recalled the evacuation of residents as the firestorm neared – her own home, one canyon over from the firestorm area, was spared. While the real estate market was in a down cycle at the time, the fire led to a rush of sales activity.
“We would’ve slipped into the recession a lot sooner had the fire not happened,” she said. “A lot of people chose not to rebuild, so they went and bought property.” Also, she said, the giant new homes that replaced the destroyed properties brought an unexpected development.
“It has created a luxury home market that we didn’t have before,” she said. “Buyers are coming from all over right now. San Francisco used to be our biggest draw.”
Some of the older homes that survived the firestorm dropped a bit in price as the new homes came on the market, McConville also said. But the national real estate boom, which has been particularly pronounced in coastal areas, has brought up the price on all types of real estate.
McConville said that the rebuilt homes in the fire area range around $1.2 million to $2 million in price, up from about $1.1 million to $1.4 million three years ago.
“It is definitely a very healthy market. The devastation, the horror of that fire actually seemed to have created benefits down the road,” she said.
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