A firefighter passes a residential property as flames engulf a California hillside.
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Nearly 2 million homes with a reconstruction cost value of more than $638 billion are at an elevated risk of wildfire damage this year, according to a new report by data analytics provider CoreLogic.
This wildfire season is well on its way to setting a record for one of the most destructive years for wildfires in recent memory, and the pandemic is creating additional complications, according to the report, which provides insights into single-family and multifamily residential properties at risk of damage from wildfires in the United States.
The devastating wildfires raging across the Western United States have left homeowners facing the challenge of starting from scratch. With disruptions to the supply chain for raw materials, manufacturing and transportation, the resulting hit to reconstruction efforts could be further challenged.
There is no state that is completely free from wildfire risk, but CoreLogic’s wildfire data indicates that over the past two years, approximately 96.4% of the total acreage burned in the United States was in 13 fire-prone Western states, plus Alaska and Florida. These 15 states are the most susceptible and have an expectation of severe property losses due to wildfire.
Alaska, due to its size and concentration of forested area, accounts for a large segment of total wildfire acreage each year. And Florida, even with higher levels of humidity and rainfall, tends to experience a relatively large share of wildfire activity.
As the nation’s population increases and residential development extends farther from metro areas, more homes and businesses will face the threat of wildfires.
The Los Angeles metro area tops the list of metropolitan areas with the greatest single-family residences at wildfire risk, followed by the Riverside and San Diego metro areas. California is home to 76% of the residences on the top 10 list, but the reconstruction cost value of these homes comprises nearly 84% of the list.
“Covid-19 has upended the day-to-day life for people around the world and created additional complications to an already dangerous and deadly peril,” said Tom Jeffery, principal hazard scientist at CoreLogic.
“Add a wildfire event to this equation, and a community can suddenly become engulfed in logistical challenges as it responds to evacuation or shelter needs from people displaced from their homes,” he explained. “Preparation, evacuation, immediate response and the aftermath for an event are areas homeowners, government entities, insurance companies and disaster response groups should consider when effectively planning for a wildfire in the time of Covid-19.”
Wildfire is a unique peril because the level of damage is often binary – a home is either left untouched by the fire or a total loss occurs. A patchwork of devastation occurs as fires pass by some properties indiscriminately while surrounding homes are reduced to ash. Unlike flooding or hail, a wildfire can and often does result in a 100% loss of the structure.
Wildfires are fueled by forests, brush and grasses found naturally in the environment that exist in much greater quantity and density than most decorative plantings around a home. The West is particularly vulnerable to wildfire damage because of the fuels, climate and terrain, which in combination create a disproportionate number of devastating wildfire events every year.
The pandemic is creating additional complications to an economy that was already vulnerable. Lumber prices have steadily risen since the economic crisis began due to an increase in demand combined with lumber mill shutdowns. The wildfire devastation has had a direct impact on the value of homes.
The construction industry is facing an estimated shortage of 1 million skilled workers by 2023. The pandemic has created a shortage of contractors who conduct necessary structure and landscape mitigation, leaving high risk areas more vulnerable to wildfire damage.
Additionally, the crisis has meant many essential grocery store items such as toilet paper, paper towels and cleaning supplies are in short supply or unavailable. In the aftermath of a wildfire, these and other items would remain in high demand and even shorter supply.
In the wake of Northern California’s devastating Tubbs Fire in October 2017, many residents discovered their homes were underinsured by hundreds of thousands of dollars. CoreLogic noted this can happen when insurers base their coverage on replacement cost rather than reconstruction cost.
CoreLogic recommends homeowners and insurers confirm that the value of homes has been accurately assessed. It is important to regularly re-evaluate the reconstruction value of a home to prevent underinsurance, as material and labor costs for reconstruction fluctuate regularly.
Underinsured homes can leave many homeowners without enough coverage to rebuild in the wake of a fire. In these cases, homeowners will often walk away from their mortgages, creating spikes in delinquency. For instance, after the Tubbs Fire, the delinquency rate in Sonoma County, where much of the damage occurred, reached 50%.
The full impact of the pandemic is still unknown, but there may be disruptions to the supply chain for raw materials, manufacturing and transportation, causing repair and rebuild efforts post-disaster to be especially challenging. Additionally, insurers could be challenged with an influx of claims and fewer adjusters to review damages.
Mick Noland, general manager of insurance at CoreLogic, noted that the business landscape has changed tremendously in the past year. He explained, “The insurance industry is having to ask the tough questions, how do I resolve a claim if I cannot assess their home in-person? How can I assess risk without a home survey? Finding the answers will take a great deal of technological transformation, new tools and big ideas.”