Sandra and Tom Johnson were at home in Los Angeles County one January night, watching the news of the Palisades fire on television, when a neighbor knocked on the door. He wanted them to see it: flames in the mountains in nearby Eaton Canyon.
Within the hour, firefighters ordered the Johnsons to leave their home in the community of Altadena. “We just had to forget our stuff, grab our dog and run,” said Ms. Johnson, 72, a retired mail truck driver for the Los Angeles Unified School District.
The couple sped off while fire consumed their home of 49 years, as well as the yard studded with fruit trees and vegetable patches that Mr. Johnson, 76, had meticulously tended.
They went to their daughter’s house in Palmdale, an hour north, and almost four months later, they’re still there. As they contemplate their next move, one thing feels clear: They are not going back and rebuilding. It’s a particularly fraught calculation for those 50 and older.
“It’s too hard at this age to wait years and years and years to be back to normal,” Ms. Johnson said.
Over the course of one short week, the Palisades fire, on the west side of Los Angeles County, and the Eaton fire, on the east side, destroyed more than 16,000 structures and damaged over 2,000 more, according to the state. Not counted in that tally are homes the blaze skirted, but are still uninhabitable because of smoke damage and a lack of utilities. That translates to tens of thousands of households trying rebuild or sell at a time when federal tariff and immigration policies could make constructing homes more complicated and expensive.
“They’re really difficult decisions that people have to make, especially when your home is your No. 1 investment for most folks,” said Gabe Osburn, director of planning and economic development for Santa Rosa, Calif., and one of the officials who led that city’s recovery after the devastating Tubbs fire in 2017.
“You’re going through that thought process of, ‘Do I just want to live in this area?’” said Mr. Osburn, whose own home was barely outside the Tubbs burn area. “And if you do, you then have to decide, do you want to go through this process with the insurance company that can be long and drawn out for the rebuild?”
Younger homeowners can spend decades trying to rebuild savings, even while risking an encounter with another wildfire. But their older neighbors have less time to regain their financial security. A disaster can even hurt their ability to afford long-term care and elder housing options. At the moment, devastated Los Angeles homeowners of all ages say the pressure is on to make a decision — whether that’s to rebuild and lock in contractors, or to sell and find a new home.
It’s all the more reason, experts say, to slow down and consider your options.
“What I am advising people is, this is a shock and a trauma and a total upending of your life,” said Jen Mulder, of Pathway Financial Services in West Los Angeles. Ms. Mulder had multiple clients, as well as a relative, who lost their homes in the fires. “It’s never going to be the same, and that’s a terrible, terrible loss, so take some time to think about it.”
If You Want to Sell and Move
In California, recent legislation gives some wildfire victims more financial flexibility than some homeowners have in other parts of the country.
Homeowners who bought actual cash value policies in a bid to reduce their insurance premiums may see lower payouts. That’s because their insurers can account for the depreciation of the home — its age and condition immediately preceding the loss.
But for homeowners who bought replacement cost value coverage, insurers cannot, by law, consider depreciation. Instead, insurers must negotiate a settlement that takes into account only the limits of the specific policy and what the lost home would cost to rebuild — meaning, the home as it stood the day before the fires, plus any building code upgrades included in the policy.
The policyholders may use that money to stay and rebuild, or sell and move on. For these homeowners, selling can look like the cleanest way out. But homeowners should stay alert for potential issues, experts say.
Chief among those issues: the cost of the home you buy to replace the one you lost. California law says that insurers have to cut you a check for either your policy limit, or the cost to repair, rebuild or replace your damaged home, whichever is less.
In other words, “You can’t buy a cheaper house and pocket the difference” between your insurance payment and the cost of your new home, Amy Bach, executive director of United Policyholders, an insurance advocacy group, wrote in an email.
There’s also timing to consider. In Santa Rosa, many people listed their lots for sale at the same time, glutting the market, Mr. Osburn said. “And then what do you do when you’re still paying a mortgage, and you’re balancing all those other things out financially?” he said.
If you do sell, consider renting for a while, Ms. Bach said. “I have quite a few United Policyholders volunteers who have said, ‘If I had to do it all over, I wouldn’t have been so quick to buy a replacement home,’” she said. “‘I would have taken more time to get the home I really wanted.’”
If You Want to Rebuild
For others who have the financial means and energy to do so, rebuilding may feel like the only way to repair what nature ripped away. And the community that returns can be stronger.
“You go from neighbors that you may have seen once or twice a week, and you wave as you drive down the block, to all of a sudden, neighbors that are meeting every Wednesday to talk about rebuilding, to they’re now together on holidays,” Mr. Osburn said, of the experience in Santa Rosa.
But rebuilding can be expensive. When Kris Hamilton’s home burned down in a September 2017 wildfire, a top-of-the-line insurance policy gave her and her husband the money to rebuild on their property outside Yosemite National Park. Since they both work remotely, they could schedule the construction around their work life. At the time, she was 47 and her husband was 62, and they had no children together.
Even in those circumstances, Ms. Hamilton said, the time and attention they had to pour into the project “absolutely affected personal finances. We took a hit in income.”
Rebuilding costs can also vary widely. Ryan Miyamoto, of Derive Wealth, a financial planning firm in Pasadena, Calif., said one of his clients was quoted $800 per square foot for a custom rebuild of his Craftsman bungalow in Altadena. Some estimates, though, are running as high as $1,200 per square foot.
And that’s before many sites have even been cleared of rubble.
What to consider, according to your age
People in their 50s and even 60s may still have years of income ahead to make up deficits that could come with a rebuild, but the end point of a career is likely in sight.
“Can you manage that in your cash flow without sacrificing your retirement savings?” Ms. Mulder said. “Realistically, at some point, you’re going to either be forced to retire or take retirement, and you need to have the resources to be able to live on.”
Having comprehensive insurance is critical for anyone relying on their home equity to fund some of their retirement or long-term care expenses, Ms. Mulder said.
“That’s one reason I look at risks for clients and making sure they are insured properly for those risks, or at least understand what the risks are,” she said.
One lesson from this disaster, she said, is that homeowners should review their insurance policy and ensure “it makes sense for their situation.”
That’s an increasingly complicated question as premiums continue to rise, particularly in communities in and around what are now known wildfire zones. Last year, California allowed a home insurer to raise rates an average of 34 percent. “It’s anyone’s guess where insurance prices are going to go, but I can promise you, they’re not going down,” Ms. Bach said.
Mr. Miyamoto said some of his clients worry: “I am only 50, and if I live in this house again till I’m 90, what are the chances that it happens again in those 40 years? And will I be insurable next time?”
For homeowners in their 60s, the wildfire loss could fast-track lifestyle changes, said Wes Patton, a Santa Barbara-based partner at Mission Wealth, a financial planning firm.
“Losing a home in a disaster could be an opportunity to downsize, or rebuild or live for a few months at some other locale,” he said, including moving to a place closer to adult children and grandchildren.
For those in their 70s or older, the prospect of devoting so many resources to rebuilding can be daunting.
“As one of my clients put it, ‘I don’t have it in me to decide where the third bedroom goes, or the second bathroom goes, so I’m not going to rebuild,’” Mr. Miyamoto said.
In Palmdale, the Johnsons are strategizing. Can they afford Temecula, in Riverside County? Should they move to a suburb of Las Vegas, where a lot of their high school friends have migrated?
And how would that process even work?
“Ideally, we’ll get an architect to make a house for us,” Mr. Johnson said.
“But that’s a dream,” Ms. Johnson said. “I want the house made, already done.”
Mr. Johnson smiled and asked his wife of 51 years, “Oh, do you now?”
“I want it new, but already done,” she said. “We won’t do anything else.”
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