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Is Southern California Ready To Rebuild?

Thursday, October 25, 2007

Oct. 25, 2007 (KGO) -- The wildfires have already caused an estimated $1 billion dollars in property damage alone. But will the rebuilding process give a shot in-the-arm to the southland's construction industry?

Before even the last flame is extinguished, people who have lost their homes in the Southern California fires are thinking: rebuild.

"When the house is lost, you learn that you actually get to build the house twice. The first one is to rebuild the house that was in order to get your settlement from the insurance industry. Then you have your hopes and a dollar figures as to what you can build then," said Oakland Hills homeowner Peter Dempsey.

The 1991 Oakland Hills firestorm reduced Peter Dempsey's home into an eighteen-inch deep pile of ash. It took him 14 months to settle with his insurance company, another 18 to rebuild.

"There was a lot of demand so that pushed all the prices for the materials used in building a house. Also, you had all their employees. Everyone was fully employed so prices get pushed when that happens," said Dempsey.

It would be uncouth to say the home building industry profits from disasters. Nevertheless, with some 1,800 homes lost, rebuilding them will benefit the current cool down in construction.

"To rebuild your home it will probably be easier now than it would have been two years ago," said Joseph Perkins from the Home Builders Association.

"Given that a terrible thing has occurred, there are pluses and one of them is it's going to give more activity to the housing construction industry that's been in weak times recently," said Prof. Dwight Jaffee from UC Berkeley's Haas School of Business.

Dwight Jaffee teaches real estate and finance at UC Berkeley's Haas School of Business.

"Catastrophes like this can provide a big advantage to urban planning, sort of start over in certain areas," said Jaffee.

Local planners hold the cards defining what an improvement is -- a neighborhood may be upgraded, but at what cost?

"Hurricane Andrew, which hit Coral Gables, Florida in 1992 was a lower income neighborhood. Most of them simply sold out at favorable prices, sold their lots and it was re-developed as an upper end community," said Jaffee.

Dempsey says many of his neighbors sold their lots to spec builders but he found a good contractor and now enjoys his new home-sweet-home.

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