Known for luxurious properties and breathtaking views, our area ridges and barrancas have faced significant wildfire risks, particularly in recent years. For buyers and sellers, understanding how wildfires impact real estate is crucial for making informed decisions.
As frequent wildfires have heightened awareness about fire risks, buyers are now more cautious about investing in potentially vulnerable properties. Key considerations include
- Location and Vegetation: Properties near dry brush, canyons or dense vegetation are perceived as higher risk. Buyers may look for homes with cleared perimeters and minimal flammable landscaping.
- Fire Zones: Some areas are officially designated as "high fire hazard severity zones," which influences insurance costs and buyer confidence.
- Defensible Space: Buyers increasingly prioritize properties with defensible space—a buffer zone that reduces fire spread by eliminating flammable materials around the home.
One of the most significant ways wildfires impact properties is through insurance. Coverage has become both more expensive and harder to secure.
- Rising Premiums: Home insurance costs have risen sharply for properties in wildfire-prone areas, with some premiums doubling or tripling in recent years.
- Policy Restrictions: Many insurers have limited their coverage options, and some have pulled out of high-risk zones altogether, leaving homeowners to seek coverage from specialty insurers.
- New Requirements: To qualify for coverage, buyers may need to invest in additional fireproofing measures, such as installing fire-resistant siding, heat-resistant windows or sprinkler systems.
This issue was recently addressed at the Thousand Oaks Rotary Club’s 33rd annual Economic Outlook Forecast event at California Lutheran University. A panel of industry experts provided insights on how the insurance environment affects the public and private sector, homeowners, businesses, and insurance companies and agencies.
Changes in Property Values
Wildfires can have mixed effects on property values, creating challenges for buyers and sellers alike:
- Short-Term Decline: Properties directly impacted by wildfires or located in nearby areas often experience a temporary dip in value due to safety concerns, visible damage or reduced buyer demand.
- Long-Term Resilience: Despite temporary setbacks, our area’s desirability and limited inventory often lead to a recovery in property values. The market tends to stabilize as rebuilding efforts improve infrastructure and safety measures.
- Luxury Market Dynamics: High-end properties with advanced fire-resistant features or located in areas with robust community fire prevention efforts tend to retain their value and attract discerning buyers.
Increased Demand for Fire-Resistant Features
As wildfire risks grow, so does the demand for homes designed to withstand these natural disasters. Key features attracting buyers include
- Fireproof Materials: Properties constructed with materials like fire-resistant roofs, concrete walls and treated wood are increasingly appealing to buyers.
- Advanced Fire-Suppression Systems: Automatic sprinkler systems, fireproof vents and water storage tanks for emergency use are becoming must-haves in wildfire-prone areas.
- Community Fire Safety: Properties located in communities with enforced fire safety standards—such as controlled vegetation, fire hydrants and emergency access routes—are in higher demand.
- Enhanced Preparedness: Properties with backup electrical systems (solar with battery back-up or generators) for the numerous power outages are desired.
Future Land Management
As local and state governments address wildfire risks, their actions will affect Ventura County's real estate market. Essential improvements include
- Stricter Building Codes: New construction must adhere to fire-safe building standards, including the use of non-combustible materials and ensuring proper spacing between structures.
- Evacuation Routes and Infrastructure: Improved planning for evacuation routes and upgrades to infrastructure can provide reassurance to potential buyers.
- Community Education and Programs: Initiatives such as the "Firewise USA" program encourage homeowners to maintain defensible space, reduce flammable materials and participate in neighborhood-wide safety efforts.
Homeowners are encouraged to contact the Ventura County Fire Department to schedule a free wildfire evaluation. Making preparations before your insurance company requires the repairs and foliage removal is key.
Ensuring Insurance Coverage
In response to Governor Gavin Newson’s September 2023 order to develop a regulatory plan to stabilize the insurance market, Insurance Commissioner Ricardo Lara announced the “Sustainable Insurance Strategy.” These reforms allow insurance companies to incorporate the cost of reinsurance into rates, as well as the ability to use “forward-looking estimations” of risk for catastrophic models. These reforms will result in additional insurers willing to insure properties in California, although they will be at higher premiums.
Homeowners should be aware of these guidelines shared by one insurer about steps they can take to prevent their insurance company from issuing a non-renewal of their policy:
- Maintain the Roof: Remove debris, algae or moss. The maximum allowable age of a roof is 25 years (30-35 years for tile or metal roofs).
- Manage Brush: Trim tree limbs hanging over the roof; provide a 5-foot clearance. Ensure a clearance of at least 100 feet from the home for all unmanaged vegetation.
- Increase Fire-Resistance: Install ember-resistant venting. Enclose eaves with non-combustible materials. Replace wood decking and siding.
- Update Infrastructure: Ensure heating and electrical systems (the service panel/breaker box) are not more than 25 years old. Replace knob and tube wiring (there can be none). Plumbing (pipes, lines, fittings, connectors, valves, drains and hoses in visible areas) must have been updated in the past 25 years (15 years for the water heater).
- Decrease Claims: Don’t file ANY water damage claims or more than one claim (regardless of the amount or type) in a 5-year period.
Rosemary Allison is a widely respected real estate expert and elected councilwoman on the Santa Rosa Valley MAC. Her fellow Economic Outlook Forecast event panelists are Dr. Mathew Fienup, executive director of the Center or Economic Research and Forecasting (CERF) at California Lutheran University; Bill Matlock, district manager for Farmers Insurance; and Elizabeth Melvin-Atilano, executive director for the Ventura County Schools Self-Funding Authority.
3 Levels of Fire Insurance
Level 1: Preferred/Admitted Insurers: They offer the best policies in terms of coverage, limits and premium. They have the strictest guidelines to qualify for a new policy and are primarily non-renewing policies in high fire hazard areas. Companies include Allstate, AMICA, Chubb, Cincinnati, CSAA, Encompass, Farmers, GEICO, Liberty Mutual, Mercury, Nationwide, Progressive, Pure, Safeco, State Farm, Travelers, Safeco and USAA.
Level 2: Non-Preferred/Non-Admitted Insurers: They offer policies that provide less coverage, fewer endorsement options, lower limits and higher premiums. Often considered the “secondary market,” they are not approved or backed by the state and may not comply with local insurance laws and regulations. If the homeowner files a claim and it can’t be paid due to insolvency, the claim will not be paid. They include American Modern, American Western Home, AZGUARD, Evanston, Great Lakes SE, Kinsale, KW Specialty, Lloyd’s of London, MSI/Spinnaker, Private Client Select, Scottsdale and Vault E&S.
Level 3: California FAIR Plan: Deemed the last resort for homeowners who have been declined by other insurers and are unable to purchase a policy, the plan insures high-risk properties, primarily covering fire, smoke, lightning and internal explosion. Unfortunately, the Palisades and Eaton fires could bankrupt the plan.