Investing.com — Stocks Toll Brothers (NYSE: NYSE: ) rose 3.7% Friday morning, while other apartment building stocks also posted gains as devastating wildfires continue to plague Los Angeles. Lennar corp. (NYSE: NYSE: ) was up 2.7%, PulteGroup (NYSE: NYSE: ) was up 2%, DR Horton (NYSE: NYSE: ) was up 2% and KB Home (NYSE: NYSE: ) was up 4.7%.
The rise in these stocks comes as firefighters report some success in battling wildfires that have scorched parts of Los Angeles County. Despite the progress, the return of strong winds on Friday has the potential to worsen the situation. The ongoing fires have claimed 10 lives and destroyed nearly 10,000 structures, and Los Angeles County Sheriff Robert Luna expressed a grim outlook at a recent news conference.
As the region grapples with the devastation, market reaction suggests an expectation of increased demand in the homebuilding sector due to the need to rebuild in affected areas. The fires, which have been described as the most destructive in Los Angeles history, have consumed over 34,000 acres, turning entire neighborhoods to ashes.
The Kenneth Fire near Calabasas is 35% contained and the Lidia Fire is 75% contained, while other fires continue to burn with varying degrees of control. The financial impact of the fires is expected to be significant, with private forecaster AccuWeather estimating damages and economic losses between $135 billion and $150 billion.
The disaster prompted President Joe Biden to declare a major disaster and pledge federal compensation for recovery efforts. The direct economic fallout, combined with the potential for a difficult recovery and increased homeowner insurance costs, is likely to weigh on inventory results in the homebuilding sector.
In addition to the immediate response to the bushfires, concerns have been raised about the allocation of government resources and the challenges facing less affluent households in handling insurance claims. These questions highlight the broader implications of a disaster for the community and the potential long-term needs for rebuilding and recovery.
As the situation in Los Angeles continues to evolve, investors in the housing stock are closely monitoring developments and the potential for increased demand in the sector due to rebuilding efforts.
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