Although the 2019 wildfire season was less destructive than previous years, the 2019 fires and fires from previous years have had a large impact on real estate and insurance industries. Some homeowners in high-risk areas have seen loss of coverage, while others are experiencing extremely high insurance premiums. Potential homebuyers for homes in high-risk areas are being denied coverage or are backing out of purchases due to the high premiums. As wildfire frequency and intensity escalates in California, concern for the real estate market grows.
Risks to the California Real Estate Market
The Thomas Fire Burning Through WUI in Montecito, CA by National Interagency Fire Center
One factor contributing to the real estate problem is the wildland urban interface (WUI). WUI is an area where newer housing has been built near an abundance of wildland fuels. With a higher risk for wildfires, insurance premiums become more expensive. Some homeowners or potential homebuyers are not willing to pay these, so sales of homes in the high-risk areas have slowed. Another cause leading to concern for real estate is homeowners that have experienced wildfire destruction are not willing to risk rebuilding in fear of repeated loss. In turn, less homes are on the market because previous owners are simply selling the burned plot of land. Despite the negative effects of wildfires on the real estate market, there have been positive outcomes. Burn out lots along the Malibu coast, where the Woolsey Fire burned in 2018, are selling for low prices. Although this can be viewed as an excellent opportunity to build a dream home along the Malibu Coast on a cheap plot of land, it is also troublesome being that it is a fire prone area.
Aerial View of Woolsey Fire Burn Scar by NASA
The Housing Crisis
The housing industry has taken a hit due to increased wildfire activity in years past. Potential homebuyers do not have to completely shy away from wildfire prone areas, even though the real estate business has slowed down. For homeowners and those looking to buy a home, there are recommended mitigation efforts. Insurance companies will offer reduced premiums for homeowners who complete the mitigation recommendations. These steps can aid in reducing vulnerability and the risk of your home igniting during a wildfire.
Sources
https://www.theatlantic.com/ideas/archive/2019/10/can-california-save-itself/601135/
https://www.forbes.com/sites/brendarichardson/2019/11/01/four-california-counties-at-risk-of-losing-over-2-trillion-worth-of-housing-value-due-to-wildfires/#25344af35b95
https://www.bloomberg.com/news/articles/2019-10-28/-burn-out-malibu-lots-hit-the-market-as-california-fires-rage
https://www.wsj.com/articles/high-cost-of-wildfire-insurance-hurts-california-home-sales-11578220200
https://www.sfchronicle.com/business/networth/article/To-keep-insurance-some-homeowners-now-have-to-do-14294099.php
How Malibu’s real estate market has changed after last year’s wildfires
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