The Southern California wildfires (Palisades, Eaton, Hurst, Kenneth) are still burning and are one of the most destructive disasters in the history of Los Angeles. More than 20,000 acres have burnt in the Palisades fire and over 14,000 acres in the Eaton fire. Many thousand structures have burnt down; entire communities including homes, schools and businesses have been gutted. The harrowing images of widespread destruction paint a grim picture of the devastation caused by these fires. Tens of thousands of residents remain displaced under evacuation orders, facing uncertainty and the loss of homes and livelihoods.
The economic consequences of these wildfires will be far-reaching and severe. AccuWeather forecasts a staggering economic impact, with estimated damages ranging from $135 billion to $150 billion. The road to recovery will be long and arduous for everyone affected by this unprecedented disaster.
The toll from these fires will deal a serious blow to a home insurance market that is already in crisis. This crisis is exemplified by State Farm’s decision in 2024 to not renew 72,000 policies, including 70% in ZIP code 90272 in the Pacific Palisades, one of the most severely impacted regions from the current wildfires. Many of these non-renewed policies cover areas at high risk of wildfires, earthquakes, or have densely populated homes. This trend, with AllState also halting new homeowner insurance sales and other insurers following suit, highlights the mounting challenges facing California’s home insurance market. Many home insurers have been unable to increase their rates in line with the growing natural disaster risks, costly home repairs and higher reinsurance premiums.
The decision of numerous insurance companies to decline to renew or offer new policies in California has left many homeowners with limited options. As a result, many have been forced to seek coverage through the California Fair Plan (CA FAIR), a state-backed insurance program. CA FAIR coverage, however, offers significantly more limited protection compared to traditional home insurance policies. Policyholders face higher premiums and a coverage limit of only $3 million, leaving many homeowners inadequately protected against significant losses. CA FAIR will be severely strained by the current fires, and this will likely result in a huge increase in policy premiums for everyone in the state.
The devastating wildfires will have a significant and long-lasting impact on the housing market. In the immediate aftermath, the displacement of thousands of residents will surge demand for both rental properties and available homes for purchase, likely driving up prices in the short term.
The long-term effects are equally concerning. The increased costs associated with rebuilding homes, coupled with rising insurance premiums driven by increased wildfire risk, will inevitably lead to higher homeownership costs. This will significantly impact affordability and accessibility for many residents.
There are many ways you can help those affected by the wildfires: World Central Kitchen (https://wck.org/), Airbnb is offering temporary free housing for those displaced (https://news.airbnb.com/airbnb-org-offers-temporary-housing-to-people-impacted-by-the-los-angeles-wildfires/), California Fire Foundation Wildlife & Disaster Relief Fund (https://www.cafirefoundation.org/what-we-do/for-communities/disaster-relief), Pasadena Humane Society (https://pasadenahumane.org/eaton-canyon-fire-update/) and many more. Lenders can efficiently identify and prioritize properties most at risk from natural disasters by combining comprehensive property-level insights of Disaster VisionTM with the precision of ValINSPECT Disaster. This targeted approach eliminates the need for immediate inspections of every property within FEMA-designated areas, streamlining the process while focusing resources where they are needed most.
