California's housing slump speeds recovery for wildfire victims

SAN DIEGO -- The housing slump is spreading gloom through the economy, but it's turned out to be a silver lining for thousands of Southern Californians who lost homes in last October's wildfires.
Families have their pick of builders. Idled subdivision builders are willing to take on single-home projects. One developer is taking burned lots as down payments on new tract homes that aren't selling.

More than 1,000 foreclosed houses repossessed by banks are up for auction in fire-ravaged areas.

"Daily we get flyers in the mail from people wanting our business," said John Vehar, 56, an AT&T Inc. project manager who lost his home in Ramona, north of San Diego.

The abundance of unsold houses and underemployed builders and contractors has helped Southern California get off to a fast recovery after nearly 2,200 homes were destroyed from north of Los Angeles south to the Mexican border. Flames charred about 800 square miles and killed 10 people.

Insurers are putting money in people's pockets. They have doled out $1.27 billion to cover wildfire damage, more than half the total claims of $2.26 billion. Industry watchdogs say companies may be trying to avoid lengthy payment disputes that dogged them after Southern California's massive wildfires in October 2003.

"This is the fastest ever - they're writing the check and getting out of Dodge," said George Kehrer, a lawyer at Community Assisting Recovery, a nonprofit group that counsels wildfire victims.

The state insurance commissioner has received only 138 complaints about wildfire coverage. Only 22 relate to underpayment by insurers, far fewer than in 2003.

Southern California, once one of the hottest housing markets in the country, was already suffering a severe housing slump that has only deepened since the fires. Home sales in a six-county swath were at their lowest in 20 years in December, according to research firm DataQuick Information Systems. New home construction is at a standstill.

The median home price in Southern California fell to $425,000 last month, the lowest since February 2005. With potential buyers pinched by the tightening credit or waiting for prices to fall even lower, fire victims flush with cash from insurance payouts are prime targets.

"In a slow time for homebuilding, it's a way for us to keep our people employed," said Mick Pattinson, chief executive officer of builder Barratt American, which is soliciting heavily in the Rancho Bernardo area of San Diego. "We hope to get our share."

It's a stark contrast to 2003, when nearly 3,600 homes were destroyed and the displaced were forced to compete for builders and contractors amid the housing boom.
"Nobody wanted us," said Karen Reimus, who owned one of 312 homes destroyed in San Diego's Scripps Ranch area in 2003.

As in previous disasters, the recovery is moving unevenly. In the seaside enclave of Malibu, near Los Angeles, where homes were lost in October's fires and again in November, rebuilding is slowed by state restrictions on coastal construction. City officials said they weren't aware of any burned-out residents planning to move away.

In the San Bernardino Mountains, many of the more than 400 decimated lots are still covered in debris and buried by snow, but one contractor has his house framed.

Reconstruction appears to be moving fastest in San Diego County, where one destroyed property has been replaced with a prefabricated home and at least 20 more have broken ground.

It has become easier for Californians to use insurance checks to move elsewhere, instead of rebuilding on their burned lots. After the 2003 fires, insurers were required to pay only policy minimums to customers who wanted to move. Under a new state law, they must pay whatever the policy will cover to rebuild on the burned lot.

"Right now the market is such that you can buy a house for a lot less than you can build one, especially with construction costs up," said Chris Hasvold, a broker in fire-struck Fallbrook, north of San Diego. "The appeal of moving elsewhere is that you can get on with your life."
One couple recently swapped their burned lot in Escondido, about 40 miles north of downtown San Diego, for a $250,000 credit on a new $700,000 tract house nearby. They moved in just before Christmas.

"If we didn't have standing inventory, we wouldn't make this offer," said Mark Connal, sales director for Michael Crews Development, which is negotiating similar trades with other families. He said he expected to hold on to the burned lots until the market recovers.

Frank Monticello, a financial manager at Hewlett-Packard Co., considered selling his burned lot on the Rancho Bernardo street where he and his wife have lived for two years. Then a developer offered to build a custom home for about the same price he would pay for an older house in the area.

Monticello negotiated a lower price once he learned the builder was selling similar floor plans in Riverside County at a substantial discount.

"We could probably wring some more out of them if we wait, but we really want to get going here," said Monticello, whose wife, Cheryl, gave birth to their second daughter shortly after the fires. "If things go perfectly we'll be in by Thanksgiving but we just want to be home by Christmas."

By ALLISON HOFFMAN - Associated Press Writer

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