California real estate market takes hit as fire insurance costs grow
Homeowners face high costs to protect their property in fire-prone areas and beyond
California's wildfires are cooling the state's real estate market as insurers seek to back out of fire-prone areas and would-be buyers face high costs for plans.
The situation is causing buyers to have a hard time finding insurance and to then back out of purchases or lower their offers, The Wall Street Journal reported Sunday, citing real estate agents and homeowners.
California has seen numerous wildfires in the past few years. There were 16 in last October alone. Last month, state officials added protection for homeowners, preventing insurance companies from dropping them as customers for a year after a disaster-level wildfire burns near their homes.
Firefighters battle the Cave Fire burn as it flares up along Highway 154 in the Los Padres National Forest, above Santa Barbara, Calif., Tuesday, Nov. 26, 2019. (AP Photo/Noah Berger)
CALIFORNIA TO PROTECT INSURANCE POLICIES IN WILDFIRE AREAS
State officials added the rule after they said insurers had dropped fire coverage for more than 350,000 residents following devastating wildfires in 2018.
The new protections apply to more than 1 million California households, according to the report. But they don't cover homebuyers or owners in areas that didn’t have a wildfire in 2019.
The amount of damage caused by California wildfires has increased dramatically in recent years. Wildfires in 2008 caused $719 million in damage, The Associated Press reported. In 2015, California wildfires caused $1.1 billion in damage. The combined damage total for 2017 and ’18 was $25.3 billion, according to the report, which cited the California Department of Insurance.
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A wildfire approaches a residential subdivision Oct. 24, 2019, in Santa Clarita, Calif. (AP Photo/Marcio Jose Sanchez)
WILDFIRES TORCH CALIFORNIA’S PROPERTY INSURANCE MARKET
For homeowners who can't find an insurer elsewhere, California does offer insurance through its FAIR Plan. But the policies have coverage limits of $1.5 million, don't cover other standard items like theft and can cost thousands of dollars a year, the Journal reported.
"Putting an even higher bar on the financial requirements of homeownership means that some folks are going to get priced out," Jordan Levine, deputy chief economist for the California Association of Realtors, told the Journal.