If you live in Southern California, it's highly likely you were affected or at least know someone affected by the recent spate of fires that tore through the area throughout most of January. Many homes were destroyed, and even those that weren't have been significantly impacted by this tragedy, in ways you might not even realize. Let's take a look at how wildfires have impacted Southern California homes over the last several years.
History of the Growing Wildfires in California
Wildfires are an annual occurrence in California. But they seem to be getting worse every year, and the ones in January affected many more people than in years past. It's not your imagination. The wildfire problem is rapidly increasing.
According to the California Department of Forestry, the 10-year average of acreage burned by wildfires has doubled since 2014. Six fires since 2017 rank among the 10 most destructive of all time, and three are among the deadliest since 1933. And those stats don't even include the January fires. It will likely get even worse in years to come, too. Why? It's largely due to climate change.
The last few years, California experienced higher-than-average rainfall - including some torrential downpours and an actual tropical storm. This has caused a dramatic increase in vegetation throughout the state, such as grass, wildflowers, and more. We've also been experiencing some of the hottest summers on record, which dries out that vegetation. Add in the Santa Ana winds, and you've got a recipe for wildfires that start more easily, spread more quickly, and are more difficult to contain.
Property isn't the only thing affected by fires, either. In January, it's estimated that around 180,000 people were displaced from their homes, even if they weren't in the direct path of the flames. For days and even weeks, thousands had to uproot their lives and go to fire shelters, or, if they were lucky, to stay with friends. And a thick layer of smoke permeated the air across the entirety of SoCal, causing respiratory issues which can lead to permanent damage. Additionally, 15,000 homes, businesses and other buildings have been damaged or destroyed.
The consequences of the fires don’t end once they’re put out. Many people continue to be displaced if their homes suffer significant damage. Remediation or rebuilding can take months, especially if you must wait for your insurance payout. The sudden high demand also means material and labor shortages, increasing costs and delaying timelines. Amid this, insurance companies have been pulling out of the area or dramatically growing premiums.
Why Is It So Hard to Get Fire Insurance?
Having your home lost or damaged in a wildfire is devastating, but having good insurance makes it easier to endure. If your home is insured, you can repair, rebuild, or buy a new home without it devastating your bank account. That is, if your homeowners' insurance covers fire - which fewer and fewer policies around California do anymore.
The insurance model is built on a lot of people paying regular premiums, while only a very few actually need to receive payouts at any given time, and most hopefully never need it at all. Wildfires mean hundreds or even thousands of people needing large payouts at once, and as those fires have increased over the years, it's led to massive losses for insurance companies. In the wake of this, a number of major home insurance providers have greatly reduced their coverage for fires in California.
For those who still have their fire coverage, premiums are increasing dramatically in order to make up for the losses insurance companies have already experienced. Depending on your home's value, before the fires, you could expect to pay around $1,500 per year on average in California for a policy that includes fire coverage. In the coming months and years, those rates are expected to spike.
And for many, homeowners' insurance with fire coverage isn't even a possibility anymore. Especially if you live in an area that had to evacuate, or worse, had to file a claim already due to fire damage or loss, getting fire insurance through a private company may be next to impossible.
California's Fair Access to Insurance Requirements (FAIR)
Fortunately, there's another option: California's Fair Access to Insurance Requirements (FAIR) plan. A state-created fire insurance program, it caters to those who can't obtain private insurance.
The plan provides coverage to anyone, even if you're in a high risk area, and won't exclude you if you've made previous claims. The basic plan covers fire, lightning, and smoke damage, among other things, with options for supplemental coverage against things like hail and windstorms.
The downside is, FAIR insurance is more expensive. Since the risk is higher, the premiums are also higher than what you'd pay with a private company. And while you can get coverage, it's often less than what private insurance companies provided in the past and may not be enough to cover extensive damage to your home.
There are also a number of gaps in FAIR's coverage. You can file a claim for fire, but it doesn't include other major hazards like theft or water damage - which tend to be more likely dangers. There's also no liability coverage to protect against lawsuits from others who may be injured on your property. Plus other natural disasters that aren't covered, such as earthquake and flood - both of which pose significant threats to Californians. In order to fill these gaps, you'll need additional policies from other insurance carriers, driving your overall costs up even further.
And the application process can be a difficult one. In many cases, before being approved, you must provide evidence that you've been denied coverage by traditional insurers. And while other policies renew automatically, with FAIR insurance, you need to go through the renewal process every year, which may include property inspections and other requirements. Furthermore, while having previous claims won't exclude you from coverage, there may be limits on how many claims you can make over the life of the policy, so if you do live in a high-risk area, long-term coverage might prove problematic.
Finally, recent cashflow issues have significantly slowed down FAIR's payout timeline. With the overwhelming number of claims filed in the last couple of months, the program has found themselves without enough money to cover everyone, requiring a $1 billion bailout from the California Department of Insurance.
While claimants will still receive their settlements, it has led to delays, and many report that FAIR payouts are taking longer than those from private insurance companies. And as the risk of wildfires is projected only to increase in years to come, these problems and delays seem likely to continue with future claims as well.
How Have the Wildfires Impacted Home Value?
In an area where the risk of damage and destruction by fire is increasing every year, what's happening to home values? Surprisingly, they're going up! California has had a housing shortage for years, and as more homes are destroyed, housing inventory becomes increasingly sparse. As demand increases and supply decreases, property values go up, and homes that weren't lost can now fetch a higher price than they could before the fires.
However, there's a downside to that as well. As prices increase, it becomes more difficult for the average homeowner to buy. Meanwhile, property investors, who do have the money, may be more reluctant to purchase a home in an area that's at an increasing risk for more fire down the line. And if your house has any fire damage, fixing it up will cost more money on top of the purchase price, which could make buying less attractive for those who can afford it.
Additionally, rents are also going up. For those who did lose their homes, even getting the money they're owed can take time. Finding a new home to purchase will take even longer, particularly considering the reduced inventory, and rebuilding can take a year or more. That means a drastic increase in renters for the foreseeable future, which in turn means higher rents. Governor Newsom signed an executive order prohibiting rent increases of more than 10% in L.A. County, but it only lasts through March 8th. Suffice it to say the wildfires have made the housing market more difficult for everyone.
How Do Wildfires Impact Sellers?
If you are considering selling your home in the wake of the wildfires, you may run into some issues. Between rising home prices and rising insurance premiums, finding a buyer may prove difficult. The housing shortage may increase home values, but it also decreases the pool of potential buyers who can actually afford those homes. As a result, you may have to lower your asking price and take less than your home is worth, in order to find someone interested.
However, there is another option. Haven Homebuyers will buy your home, even if it has fire damage. Instead of spending months on the market and decreasing your price, we'll give you a fair offer based on your home's value, within 24 hours, and you can close the deal in as little as five days. Or, if you need longer than that, to pack up your things or make arrangements for moving into your new home, you can choose the amount of time your home spends in escrow. Whatever your needs are, we'll help you get a deal that will meet them and get you what you're looking for.
How Do Wildfires Impact Buyers?
Sellers aren't the only ones affected by the wildfires. As we talked about already, the increase in home prices makes it more difficult for buyers. The decrease in housing inventory in an already depleted market means fewer homes to choose from, making it take longer for buyers to find a home.
This has led to an increase in the amount of time homes spend on the market. The median for homes on the market in California is 30 days, up from 25 days this time last year. And as costs go up, that number will likely only increase as well, as fewer and fewer people can afford homes in the current market.
In addition to rising prices, the high cost of fire insurance has made the prospect of home ownership less appealing to a lot of buyers.
The fires have also caused a disconnect between seller and buyer timelines. The most popular time to buy a home is typically around spring and summer. Families with kids like to take care of the moving process while school is out, so as not to disrupt the school year. But the fires have caused a lot of people to be ready to sell now - people who might not be able to wait until summer. This means fewer buyers and more sellers, making it all the more difficult to unload your home.
Conclusion
Whether you were directly affected by the fires or just don't want to risk being caught by the next one, selling your home is a difficult proposition in California right now. That's why Haven Homebuyers is the way to go. We take care of everything for you, because when dealing with the aftermath of a disaster, you have enough to worry about already. We'll get you a cash offer for your home in just 24 hours, even with fire damage, and get a fair price.
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