California wildfire risks push home owners and buyers to safer areas

Wildfire risk forcing widespread relocation from the highest risk areas, especially after the Los Angeles fires in January, is no longer theoretical.

According to U.S. Postal Service change-of-address data, counties with high wildfire risk (as rated by the U.S. Forest Service) have net population losses. Areas near those counties with lower risk are seeing population gains.

Three California counties, Plumas, Lake and Nevada, lost 6-11% of their residents between 2020 and 2024, with nearby counties with lower risk gaining population during that time, according to the data.

"We're seeing buyers in fire-prone ZIP codes asking not just 'Can I afford this house?' but 'Can I afford to insure it next year?' That's becoming a decision point in homes they walk away from. The data backs it up, but what matters is their behavior; insurance instability is reshaping liquidity on the ground," stated Joel Efosa, founder and CEO of Fire Cash Buyer, a company that buys, rehabilitates and re-sells fire damaged homes. "Some buyers have even pulled out of escrow when they learned that only FAIR Plan coverage was available, signaling a shift in how people evaluate real estate risk."

Gittings Photography

This relocation trend will increase in California, as homeowners insurance rates continue to rise, according to Dan Veroff, policyholder counsel at Merlin Law Group. "A lot of folks are going to be selling their homes -- downgrading, downsizing," he said. "The reason is insurance. A lot of people won't be able to maintain their homes and afford these increases. It's just, unfortunately, there's going to be a lot of home sales because of that."

Moving as a solution to increasing insurance rates does present its own hurdles, according to Katherine Hempstead, senior policy advisor at the Robert Wood Johnson Foundation.

"When insurance costs get really high, it makes it hard to sell your home," she said. "You might want to leave, and it's not that easy. There's definitely a risk to the economic viability of places if a lot of people feel like they just can't protect themselves against important financial risks. You start to see that it really affects the economic viability of certain areas."

So far, coastal area storm risks are more likely than wildfire risk to make areas too costly to rebuild or live in, according to Hempstead.

"We're a very, very, very long way from saying no one can live in this state, especially a state like California," she said. "There have been scattered examples of places where it doesn't really work for people to live there anymore."