How will the Recent CA Wildfires affect the Real Estate Market?

Across the western state, California’s landscapes offer beautiful scenery and wildlife, so it’s no wonder that many want to live in these areas for the access to nature and the seclusion from the bustling cities. In September, these very areas made headlines, not for their majestic mountains, but for the raging wildfires that ravaged the land and the homes built there. With wildfire danger growing in parts of California, what can be done to protect the land and residents who choose to live in high-risk areas and will we see buyers staying away from these areas?

The two fires that burned in September ravaged parts of Northern California, killing six people and forcing evacuation of thousands of people. Two hundred square miles were burned and 2,000 structures, including 1,300 homes were destroyed. Global insurance company Aon Benfield estimates the fires caused $2 billion worth of damage and victims have filed for claims for more than 1,000 homes that were destroyed and more than 3,200 that were damaged.

In our previously published article Stop, Drop and Cover: Home Insurance and Wildfires we touched on the basics of home insurance coverage and fires. But now that wildfires are becoming increasingly more common and more devastating due to California’s severe drought conditions, wildfire-prone parts of California are becoming more difficult to insure. Nearly 2 million households are considered at high risk of fire and some big insurance companies have stopped writing home insurance policies for these homes. Californians who can’t find insurance in the traditional market can purchase limited fire coverage from a state-established consortium of insurance companies. Many residents are faced with the dilemma of having to choose between cost and comprehensive coverage.

Are people being put in danger with homes being offered in high-risk areas? One study showed that multiple wildfires decreased the house prices in an affected area and people may be moving into these areas because of their lack of knowledge of the fire risk. Policymakers can decrease losses due to wildfires by promoting wildfire risk awareness through public information campaigns. Agents can also help by fully disclosing the risks of natural disasters to allow buyers to make more informed decisions.

As we have seen the damage caused by many wildfires over the years, should homes even be built in these high-risk areas? What more can be done to educate buyers who are looking to buy in these areas? We’d love to hear from you.