People don't build wood houses in an area that gets wild fires

Probably they will, at one point maybe that banks wills stop financing it.

But only when you can't get mortgages, people will begin to stop, and even then some will continue.

It'll take a long time for these changes to trickle out. Especially, when real estate prices in LA are so high.

It might be faster to fix this with zoning. Or if the area is so desirable, find a way to engineer your way out of it.