Investing.com -- Shares of Toll Brothers (NYSE: NYSE:TOL) climbed 3.7% Friday morning, with other homebuilding stocks also experiencing gains as devastating wildfires continue to impact Los Angeles. Lennar Corp. (NYSE: NYSE:LEN) rose by 2.7%, PulteGroup (NYSE: NYSE:PHM) by 2%, D. R. Horton (NYSE: NYSE:DHI) by 2%, and KB Home (NYSE: NYSE:KBH) saw an increase of 4.7%.
The uptick in these stocks comes as firefighters report some success in combating the fires that have scorched parts of Los Angeles County. Despite the progress, the return of strong winds on Friday has the potential to exacerbate the situation. The ongoing fires have claimed 10 lives and destroyed nearly 10,000 structures, with Los Angeles County Sheriff Robert Luna expressing a grim outlook at a recent press conference.
As the region grapples with the destruction, the market response suggests an expectation for increased demand in the homebuilding sector due to the need for reconstruction in the 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 ash.
The Kenneth Fire near Calabasas has been 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.
This disaster has led President Joe Biden to declare a major disaster and promise federal reimbursement for recovery efforts. The direct economic consequences, combined with the potential for an arduous recovery and increased homeowners' insurance costs, are likely influencing the homebuilding sector's stock performance.
In addition to the immediate response to the wildfires, concerns have been raised about the distribution of government resources and the challenges faced by less affluent households in dealing with insurance claims. These issues highlight the broader implications of the disaster on the community and the potential long-term needs for rebuilding and recovery.
As the situation in Los Angeles continues to unfold, investors in homebuilding stocks are closely monitoring the developments and the potential for increased demand in the sector due to reconstruction efforts.
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