Earthquake Risk Adds To CA's Housing Woes
CHICAGO-The California housing market, which is still reeling from foreclosures and declining values, now has something new to worry about: what might happen to prices if an earthquake strikes.
According to a report issued by reinsurance broker Aon Benfield and its affiliate, Impact Forecasting, only 14% of California homeowners carry earthquake insurance.
California is the largest home mortgage market in the nation, representing about 20% of all outstanding loans. Aon says that by comparison, "Nearly all mortgaged homes in Florida and along the entire East Coast of the United States have hurricane insurance." The report notes that a natural disaster, such as a "great" earthquake in southern California "could send shockwaves throughout the financial and insurance industries."
Aon says many mortgagors could walk away "from their damaged homes without repairing them, leaving many homes in foreclosure and forcing the banks to bear the brunt of the loss in capital." It adds that, "Thoughts of just how bad this mortgage crisis might be should a significant earthquake occur in the next couple of years have crossed many of our minds."