LOS ANGELES – Sylvia Sweeney and her husband, Bob Honeychurch, bought their three-bedroom home nestled in the foothills of the San Gabriel Valley for $780,000 in 2009. At the start of this year, it was worth more than double that—$1.6 million, by one estimate.
On Wednesday, raging wildfires swept through their Altadena neighborhood. When the couple went back later that day to see what was left of their home, all that was standing was the mailbox.
Sweeney, a 69-year old retired clergywoman, estimates that her home made up roughly 80% of the family’s overall wealth.
“It was our beautiful dream home,” she said. “It was our primary wealth.”
Towering flames powered by hurricane-force winds have destroyed or damaged more than 12,000 structures in Los Angeles County, razing some of the city’s priciest real estate on streets thick with celebrity mansions.
The fires also wiped out the homes of Californians in the middle class who bought into affluent neighborhoods decades ago, when the properties were still within reach for teachers, plumbers, and nurses. After years of rising home values, many of them have the bulk of their wealth tied up in homes that are now ash.
“It was our retirement. It was our investment. It was our equity. It was everything,” said John Kastanas, a 63-year old who works in an administrative role at the California Institute of Technology, of his historic home that burned in Altadena.
Now, those middle-class homeowners face a crushing housing crunch. Los Angeles was already experiencing an acute shortage of homes. Its real-estate prices are more than double the national level. In the wake of the fire, thousands of people desperate for temporary housing are flooding a cutthroat rental market, where bidding wars are breaking out for leases. Some are considering leaving for good.
Then there is perhaps the most daunting prospect of all for those who have lost their homes: battling with their insurance companies to rebuild.
The fires damaged and destroyed communities across Los Angeles County. Three fires were still burning across L.A. County on Sunday and portions of the Pacific Palisades and Altadena were still under evacuation orders. Officials had made progress in some areas after a break in the high winds, but warned they are expected to pick up again this week.
Two neighborhoods, collectively home to around 66,000 people, suffered almost complete devastation: Altadena, in the winding hills to the east that once served as a haven for Black middle class families excluded from other areas, and the Pacific Palisades to the west, where the ultrawealthy built compounds on cliffs above the ocean.
For those who lost their homes, much of the value of their properties is in the land they still own, but rebuilding on it will be a long and expensive process. It’s unclear how many homeowners in these areas lack insurance or are underinsured. A number of leading insurers have stopped selling new home-insurance policies in the state. State Farm said last year it would not renew 69% of its property policies in the Pacific Palisades.
Sweeney, the retired clergywoman, never planned to leave her Altadena neighborhood, intending to pass her house onto her daughter. Today, she is wondering if rebuilding is even an option. “Well, we will see how much insurance pays,” she said.
Sweeney and her husband still own their plot of land, but starting over is daunting. Facing rental costs and other unanticipated expenses after the fires, they both are considering coming out of retirement.
“We have to figure out if we really have that in us or not,” she said.
In 1988, Jim Papik, who ran a plumbing business, and his wife, Josie, muscled their way into the Pacific Palisades when they bought what Josie said was the cheapest house in the neighborhood—a two-bedroom, one-bathroom home on Sunset Boulevard for $455,000. It was valued at roughly $3.7 million before the fires, by one estimate.
“We came from nothing,” Josie Papik said. “My dad was a cook at the Beverly Wilshire and his dad worked at a phone factory.”
The house was small, but Jim loved working on it. He sold his Rolex and gold coins so they could afford to put in a second floor and traded his prized black El Camino as payment for the staircase. Josie remembers the day a group of men hauled a jacuzzi bathtub upstairs for their new bathroom. They’d finally made it, here among L.A.’s professional class, the Pacific nearly at their doorstep. Jim died in 2011.
On Thursday, two days after the fire, Josie, 77, stood in front of their home, now an unrecognizable plot of rubble and twisted metal searching for the urn that held Jim’s ashes. She wants to rebuild but she’s starting to tally up the costs. She said she was initially told insurance would cover $800,000 to rebuild, and $12,000 a month in rent, with access to the rental payments for two or three years.
She said she can afford her $2,285 monthly mortgage payment. (Lenders typically offer forbearance after natural disasters.)
“What scares me is rebuilding my home,” she said. “$800,000 is a lot of money if you live in Iowa. But I am going to build my home in the Palisades again. How far is that money going to go?”
The typical home value in the Palisades, filled with celebrity residents like Tom Hanks and Ben Affleck, was $3.4 million in November.
Already, the battle between homeowners trying to find temporary housing has begun. Steven Moritz, a Sotheby’s agent in Los Angeles, said he received 40 calls in three days from clients seeking immediate rentals.
Bidding wars are breaking out for leases in some of the remaining coveted areas. Moritz said a rental on Wednesday was going for $25,000 a month. Almost instantly, prospective tenants were offering $40,000 a month, though California law bans rent increases of more than 10% during a state of emergency.
“People are offering crazy things, and there’s just not enough product,” he said.
Some displaced homeowners are determined to rebuild. Frank Figueroa, a 43-year-old nurse practitioner, lost his Altadena house in the fire. He and his family bought the home a decade ago for around $600,000 and it has roughly doubled in value since then, he said. He is waiting on his insurance to figure out how much he will get for the rebuild.
“I don’t want to just leave this area, just on its own, just destroyed, and give up,” he said. “Maybe we’ll make a better house in that area, and make a better future, make newer memories, because all my memories just burnt up.”
Rebuilding could be a yearslong slog. It’s often a convoluted process winding through a web of insurance adjusters, contractors and local permitting agencies.
Many homeowners who were victims of the Northern California wildfires in 2017 vowed to rebuild, too. Soon a harsh reality set in. Insurance payouts weren’t enough to cover construction and other costs, and they had no solutions for how to come up with the rest of the money.
Spiraling wildfire losses in the past decade have pushed California’s home-insurance market into a crisis. Many insurers have canceled policies or stopped writing new policies in some areas, leaving homeowners with fewer options and much higher costs.
Even homeowners who thought their properties were out of harm’s way found themselves fearful of losing coverage in recent years.
In 2023, Opiyo Okeyo, a 40-year-old film producer from Pasadena, started hearing of insurers using drones to inspect homes for fire risk in his aunt’s Altadena neighborhood. When his aunt’s insurer then threatened to drop her coverage, he sent the insurance agency photos of her house to prove it was “not a risky investment”—that it was well-kept, clear of dry shrubbery, loose wires and other fire hazards.
His aunt maintained her insurance coverage, but her Altadena home burned down on Wednesday. Now, Okeyo’s 2023 photos are just comparisons for insurers to assess the damage.
Many homeowners have been forced to buy insurance from the state’s insurer of last resort. And some homeowners without mortgages have opted not to buy insurance, taking on the risk that they might have to bear the full cost of rebuilding their homes.
Given the difficulties Californians have had in obtaining affordable home insurance in recent years, many who lost their homes in the wildfires could end up discovering that their insurance policies won’t cover the full cost of rebuilding. They could pay the difference out of pocket, or they might decide to sell the empty lot, take the insurance payout and find a new home somewhere else.
Insurers will have to settle thousands of claims, a process that could drag on for months, if not years.
Buying elsewhere could be a painful prospect, too. Before the fires, Los Angeles County was already suffering from an acute shortage of homes and had a large homeless population.
The typical home value in the L.A. metro area is about $956,000, according to Zillow, more than double the national level of $359,000.
That appreciation has enabled homeowners to build up large nest eggs. Those with mortgages in Los Angeles County had an average of about $723,000 in equity in the third quarter of 2024, according to CoreLogic.
“For some people, it’s their entire life savings, and it’s not a small amount,” said Selma Hepp, CoreLogic’s chief economist.
Housing in California was about as affordable as in the rest of the U.S. until the 1970s, said Richard Green, director of the University of Southern California’s Lusk Center for Real Estate.
That started to change as politicians and voters implemented new zoning and other regulations, which made it more difficult to build new housing. The California Environmental Quality Act, for example, requires builders to comply with public environmental reviews on their project proposals, which can prolong development timelines by months, or sometimes years.
Californians also voted to limit property-tax increases for homeowners, which made homeownership more desirable and pushed up home-buying demand, Green said.
California Gov. Gavin Newsom signed an executive order on Sunday easing some of those building restrictions, part of his broader effort to expedite redevelopment of the destroyed areas.
Green estimated that before the fires, L.A. was short at least half a million housing units that were affordable to working-class and lower-income people.
“We have a market that’s been really bad at building stuff,” he said.
As home prices rose, so did rents. The average rent in L.A. at the end of 2024 was $2,297, about 33% above the national average, said Jay Lybik, national director of multifamily analytics at CoStar.
Rents now look poised to jump again with even greater competition for rentals from fire refugees. If 15,000 households in L.A. are displaced, that could push up rent by 6% or more, Lybik said.
Displaced homeowners are scrambling to find places to stay while also contending with their long-term futures.
Deborah Reno, a 69-year old retiree who used to work in media sales, bought her condo in the Pacific Palisades in 2001. Over the years, she said it had roughly tripled in value and become a “large percentage” of her overall wealth. Her entire condo building went up in flames on Tuesday while she was at a doctor’s appointment.
Reno is currently staying with friends as she files insurance claims and hunts for a rental of her own. For the long-term, she’s considering moving out of California for the first time in over two decades.
“I could go to Boise, Idaho, theoretically. My family lives in Canada. I could get another passport,” she said. “Where do I go next? That’s the big question.”
In Altadena, Kastanas is determined to stay, juggling short-term plans with a long-term rebuilding effort. He paid about $968,000 in 2007 for his home and spent roughly $500,000 to renovate it. The home was worth $2.3 million by a recent estimate.
Kastanas said his family is saving as much money as possible as they wait for their insurance to come through. They canceled their summer trip to Europe and he is no longer planning to visit his 90-year-old mother in Greece next month.
To make ends meet in the short-term, he’s considering dipping into his retirement fund early. Kastanas said he wanted to retire within the next year, but now he expects to continue working for the next three to four years.
Kastanas and his family are currently staying in campus housing arranged through his employer. The family wants to find a new rental home, but isn’t sure whether they can afford to do so. They hope that their insurance will help subsidize their rental costs.
“There are thousands of people looking for homes right now,” Kastanas said. “Will our insurance allow us to rent a house until we rebuild? We don’t know yet.”
—Anna Wilde Mathews and Sean McLain contributed to this article.
Write to Rebecca Picciotto at Rebecca.Picciotto@wsj.com, Nicole Friedman at nicole.friedman@wsj.com and Dan Frosch at dan.frosch@wsj.com.