Rising wildfire risks have made a dent in property values due to associated coverage expenses.
Homeowners in California face rising fire insurance costs, cutting into the success of the state’s real estate market.
Areas both prone to wildfire and those surrounding them are watching values shrink.
As insurers continued to raise fire insurance costs and attempted to step out of areas most prone to wildfires, the real estate market has taken a serious hit. Homeowners in the state have been watching the market cool due to the expenses linked with owning in many parts of California.
Among the main struggles is that buyers who would be interested in purchasing a home have a difficult time finding affordable wildfire insurance coverage. As a result, they frequently withdraw from their intentions to purchase or they substantially reduce their offers reported the Wall Street Journal.
The state has suffered a rising number of catastrophic wildfires, sending fire insurance costs skyward.
In October 2019 alone, the state suffered sixteen wildfires. In December, California officials solidified homeowner protections, banning insurance companies from dropping a customer because of an increase in wildfire risk on the property.
The state implemented this new regulation after over 350,000 residents lost their wildfire coverage due to changing risk levels. The majority of those policies were dropped after the widespread devastation left behind by the blazes in 2018. This regulation protects over 1 million homes across the state, said the WSJ report.
That said, the new protections for homeowners doesn’t cover new homebuyers or property owners in areas that didn’t suffer a wildfire at some point in 2019. It is in these circumstances that the real estate industry in California has started suffering.
According to reports made by The Associated Press, recent years’ wildfires have caused record amounts of damage. In 2008, the blazes caused $719 million in damage. By 2015, they were causing $1.1 billion in damage. That said, 2017 and 2018 created a combined $25.3 billion in damage, according to California Department of Insurance data. It is precisely this trend that has sent fire insurance costs to a level that they are harming the state’s real estate market.