Sep 16 , 2019
I have always told my readers that wildfires have multiplier effects on our environment. But only a few actually understand what the multiplier effects of wildfires mean. Well, if you think these fires only affect the health and destroy property, then you are in for a great surprise.
It’s affecting the insurance and real estate market seriously. Now come to think of it, do you think any rational real estate investor would want to buy a property in a wildfire-prone area?
Definitely not, and no insurance company would want to sell a real estate policy to anybody living in these areas. Sounds crazy, right? Well, this is how the California wildfire is affecting the insurance and real estate market.
There are several reported cases of homeowners living in high fire risk areas unable to get insurance cover for their properties. Similarly, their insurance companies refuse to sell them coverage. It may seem reasonable now, but if nothing is done about this, California Real Estate market could be in crisis.
Before I continue, let me ask you a question to ponder on. With the way California wildfire is recurring, is it wise to buy a real estate property in California?
Sometimes in August 2019, I read a heartbreaking story of Vallejo residents - Theresa and Daniel Ochs. They believed they have a perfect haven for their retirement years - a three-bedroom home on two acres in Garden Valley. Their home is a few miles away from Eldorado National forest.
According to Theresa Ochs “The home is what every older adult craves. It’s in a peaceful location with a nice chef’s kitchen as well as amazing woodwork”.
Guess What Happened?
They made an offer, and several insurance companies refuse to sell them a homeowner’s policy. Do you know why? It’s because Eldorado County is prone to wildfires. These couples have no option but to withdraw their offer.
As pathetic as the Ochses story sound, you can possibly blame the insurance companies from rejecting their offer. And you can also blame the Ochses for building their home in Eldorado’s country. After all, we all know that California is prone to national disasters.
You see, the California wildfire has found another way to make things difficult for people living in rural areas. You know why? Nobody would want to buy a real estate property that no insurance company is willing to insure.
This could affect the rural dwellers who rely heavily on the economic power of well - off retirees, and other people from the Bay Area, Sacramento, and other economic viable areas.
Some insurance companies that want to sell their policy take advantage of homeowners with increased policy price. Which homeowner in California Rural area is willing to pay $10,000 per year for policy?
A potential investor who’s aware of high insurance policy in these California rural areas will not want to buy any property. In the end, more businesses will lose, and the real estate market is already in crisis.
How California Wildfire is Affecting Rural Areas
By now you don’t need a fortune teller to know that California wildfire is affecting rural areas seriously. According to reports, the California housing market is in crisis due to fires. The number of houses sold in June 2019 decrease by 5% of last year’s sale.
From all indications, the crisis in the housing market is mostly affecting areas where locals can easily afford a property.
With real estate properties losing their values due to lack of insurance cover, nobody is willing to pay for these properties. This makes it extremely difficult to lure businesses or residents to any County that’s prone to fire. Since insurance companies seldom sell homeowner’s policy to people in these areas.
Again the population of the affected Counties will remain stagnant for a while. And about 20% of locals living here will be battling with poverty. You see, this is why I earlier mentioned that wildfires have multiplier effects.