Wildfire-prone areas in California are seeing home sales slow as insurers retreat from high-risk regions, The Wall Street Journal reported.
Insurers paid more than $24 billion for California wildfire losses in 2017 and 2018. Now, they’re looking to cover their losses and are reportedly raising prices or declining to renew policies in some parts of the state.
Potential buyers are backing out of purchases or lowering their offers after realizing how much the insurance would cost, real estate pros say.
“I’ve had so many deals fall through,” Lauralee Green, co-owner of Z Group Real Estate in Pollock Pines, Calif., told the Journal. In 2018, Green says she sold about $8.8 million homes, but that fell to about $4.7 million last year. She blames the high cost of insurance.
Rising insurance costs “really exacerbate an already challenging environment” for buyers in the state, Jordan Levine, deputy chief economist at the California Association of Realtors, told the Journal.
“Putting an even higher bar on the financial requirements of homeownership means that some folks are going to get priced out,” he said.
Twenty-seven percent of CAR’s real estate members reported having issues with fire insurance—either personally or with their clients—last year, according to an association survey. Thirty-four percent of those respondents said the potential buyer decided not to buy due to the difficulty of finding fire insurance.
In December, California regulators banned insurers from refusing to renew home insurance policies for one year, which applies to more than a million households across the state. However, the ban does not apply to home buyers who are seeking to buy new insurance policies to complete a home purchase.
Homeowners or buyers having difficulty obtaining fire insurance can purchase from a state insurer called the California FAIR Plan. These policies, which can also be expensive, have maximum coverage limits of $1.5 million. They don’t include standard coverage like liability and theft. Homeowners would need to purchase a separate policy to get those items covered.