It wasn’t on my housing market bingo card to be paying such close attention to insurance, but this is a huge deal for California (and some other states). I promise this won’t become an insurance crisis blog, but today I have some brand new stats to share for Sacramento and the Bay Area.
UPCOMING SPEAKING GIGS:
6/5/24 Marketing Mastermind (register here)
6/6/24 Golden 1 Credit Union (details TBA)
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA here)
6/21/24 Exporting data from MLS (details TBA)
7/9/24 Future Homes Q&A (private I think)
7/11/24 She Invests – REI Networking Group 6pm (details TBA)
9/17/24 Downtown Regional MLS Meeting Q&A 9am
9/20/24 How to Think Like an Appraiser class (details TBA)
10/18/24 Prime Real Estate (private)
10/29/24 Orangevale MLS Meeting
CANCEL INSURANCE CULTURE
A client this week was told his insurance is going to be cancelled soon due to the condition of the home. This was based on a drone inspection of the exterior, and this type of story has become increasingly common lately. Look, insurance companies need to mitigate risk, so there is nothing wrong with inspections, but the alarming part is how trigger-happy insurers seem to be about not renewing policies. Moreover, some consumers are reporting really trivial stuff that just seems like an excuse on the part of the insurer to drop the owner.
THE EFFECT ON THE HOUSING MARKET
Let’s make a quick list. How can rising insurance costs affect the housing market? A few things. The cost of insurance can affect where people choose to live, who needs to sell, what buyers are willing to pay for a house, the amount of housing supply in some markets, etc… This is an issue that has changed what is happening behind the scenes in real estate too. Yesterday, a loan officer told me that locking in insurance is basically right up there with locking in the rate. Read that again. These days, knowing a few good insurance brokers is a must since they can sometimes work magic to help consumers navigate the trenches.
ARE THE NEW STATS OLD AND MOLDY?
I’ve been checking religiously for new insurance stats from the CA Dept of Insurance, and they finally posted this week. Look, I wish we had stats through today, but the most recent numbers are through 2022. So much has happened over the past year, so these graphs only tell part of the story. And yes, “old and moldy” is a reference to the movie, Encino Man.
CALIFORNIA IS FEELING THE PAIN
There has been an increase in FAIR Plan policies throughout the state. In the past, it was areas prone to fire where residents were struggling to obtain traditional insurance, but we’re starting to see the FAIR Plan show up in other areas now. What is the FAIR Plan? See below.
BRO, WHAT IS THE FAIR PLAN?
When people can’t get traditional insurance, they get what is called the California FAIR Plan (or “unfair plan” as locals call it). This is basically an association made up of all insurers, and it’s deemed last-resort type of insurance as it tends to be super expensive. For instance, I talked to a buyer in Placer County who was quoted $800 per month for insurance alone. It’s not always that much, but we’re not just talking about the cost of a few grande vanilla lattes.
NOT A SHOCKER TO SEE AN INCREASE
First, it’s no surprise to see an increases in FAIR Plan policies in most local counties. Yet, the trend is NOT the same everywhere. El Dorado, Nevada, and Placer are in the lead for top local areas with new and renewed FAIR Plan policies. Yuba County is a much smaller area, and we see a huge increase when zooming in on the graph. In contrast, counties like Sacramento, San Joaquin, and Yolo have been flat (through 2022 at least). Like I said last month, we’re starting to see insurance issues creep into non-fire areas, so there is a good chance we’re going to see an uptick in many counties ahead.
WHAT’S HAPPENING IN THE SACRAMENTO REGION?
Let’s geek out on some bar graphs and look at the wider region in the Sacramento area. Let me know if you need to see other nearby counties too. I’ll do what I can.
THE BAY AREA
I wanted to include Bay Area images also since I know I have readers in the Bay too. Just like Sacramento, the trend isn’t exactly the same everywhere. Check out that rise in Sonoma County especially. Yikes. Any thoughts? What are you seeing in the trenches of Bay Area counties right now?
I hope that was helpful. Thanks for being here.
Questions: What are you seeing in the market right now when it comes to insurance? What do you think these graphs will look like with 2023 data? What did I miss?
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These companies are actually AWASH IN MONEY. Don’t let them fool you.
I sat as an alternate juror in the early ’20s on a huge property owner’s insurance case. Won’t go into the details, but the jury wasn’t pleased with the insurance company.
One of the witnesses was an insurance company accountant, who testified how many MILLIONS AND MILLIONS of dollars went to the regional office, then how many billions the NATIONAL office sent to SWITZERLAND.
All the insurance companies are crying poor-mouth. I can assure you they are not. THIS is a PLOY to get MORE money out of everyone.
Also, one wonders (if you believe in conspiracy theories), if this isn’t ONE technique to get us to own nothing and be happy – because of course none of us will be able to afford homes, let alone insure them.
I don’t trust these companies. (And I worked in the court system for over 30 years, so I am NOT naive).
I’m only speaking to the stats here. I’m not a conspiracy theorist guy at all. I do believe in asking questions, analyzing data, and critiquing the system.
The court system is part of the problem. I was sued because a tenant’s dog supposedly bit someone. Insurance paid over $20,000 to defend the case that we won; I was canceled. I still have another case going because my wife owns a property next door to where a lady supposedly tripped.
I seriously doubt that they want to leave the state and cancel people if all that is profitable.
Timely post for us Ryan. We just received a letter from our long time insurer last week stating our insurance was being cancelled due to ” Trees – Branch Overhang / touching”. We live in east sac with heavy tree canopy and have had an overhang of some sort the entire time we’ve been in this house and there were no limbs touching. There were no warnings. Sure seems like they’re trying to find anything they can to dump and run.
I’m so sorry to hear that. It seems like the pendulum is swinging too far here.
Ca Fair plan is a GREAT name, but I’m not sure what is so “fair” about it.
Btw, was global pandemic on your 2020 bingo card?
Haha. Yeah, they need a rebrand. No, it was not. 🙂
Curious if your lender has some leverage IF your insurance is paid from impounds.
Good question. Hopefully someone can speak to that.
Having or not having an impound account does not in any way impact the insurance companies cancellation policy, unfortunately. I have a ton of clients with impounds who are being cancelled.
Thank you. Makes sense. Just not my lane, so I appreciate you speaking to that.
I live in a small 90s house in a suburban neighborhood in Folsom. Was amazed last year that it renewed with only a minor increase to $786. But just found out it’ll be going up 36% to $1074 when at renewal next month. Not surprised and am ok with that given what is going on.
Thank John. It’s amazing how things like this work today where we feel relieved that it didn’t go up more. I have that thought quite a bit. “Well, it could have been worse…”
REAL (recent) STORY: We have a small family cabin in the El Dorado Forest on USFS land… that means we do not own the land… and can never get a mortgage on the property. Built in 1934. single wall construction / very basic / spring water for domestic use and access to Tahoe public sewer. Oddly, we are within 1.1 miles of a fire hydrant in adjacent public tract. Yet… CA, Fair Plan DOUBLED our fire insurance (remember, no liability on this policy) in Dec 2023. (We had been with CA FAIR PLAN since 2018, and never had a claim) We have elected to self-insure… and like Ryan stated…. this above scenario was not on our BINGO CARD…
Ryan – keep up the good work, that you do !
I live in Campus Commons, 95825.
We live in what is called, “An Urban Forest”. It’s a lovely community shaded by many tress 40-69 years old. “Old Growth?”.
During the last two years during what has even described as unusually strong winds accompanied by heavy rains, we Entire Campus Commons area had numerous trees fall or lose huge limbs which fell on dwelling and cars. Miraculously no one was injured or killed.
Our deductibles have increased over the last two years from $5,000.00 to $25,000.00 per dwelling. Our Village premium which we all contribute to based on the number of dwellings in the Village was so high as to create a “Special Assessment” of $2,000.00 annually Per Unit for the foreseeable future. You can guess how many years it will be before the premium cost per unit goes down. If you expect or hope that to happen, I’ve got a bridge to sell you.
Michael Caplan
Wow, Michael. Thank you for sharing. I heard inklings about this, but I really appreciate you sharing the skinny. That’s tough. Do you think it has affected the market? I actually was talking to an agent yesterday at an event, and she was wondering if the neighborhood was seeing listings build.
I’m in Oregon and have heard stories, but not as extreme these in California. Hopefully this isn’t what we have to look forward to.
I’m doing my best to keep the trend here, Gary. Fingers crossed.
Things are definitely not the same with insurance. On my latest listing, I received 2 quotes for insurance from a Farmers agent and a Mercury agent. I have never had this before. Kudos to them for being proactive about this issue and going after the business. This listing is in Wilhaggin so not a fire danger zone.
Oh wow, that’s great to hear. Thanks Richard. I am finding more insurance agents to be really engaged with the real estate community at meetings and on social media.
Another great topic! I have seen some very disturbing scenarios in the Cincinnati market as well. I personally had to fight on a replacement cost estimated for my home which was inflated by more than 80% causing a doubling of premium. After they realized they could not provide any quality data to support the estimate for replacement cost increase to that magnitude, they backed off, but I wonder how many insured are just taking the increase. Another conversation with another agent revealed that they are rolling back coverage on items below the expected life span of the component. “Roof over 15 years? We can’t cover it.” A typical roof has at lease a 25 year warranty. They will exclude coverage and charge the same premium they would have otherwise. I understand the need to increase premiums. Increases should be tied to an index of some kind and, maybe they are as my expertise in the insurance world is not at a high level, but removing components for insurability defeats the purpose of the insurance. All of this happening in an industry that ties any homeowner with a mortgage to a requirement for insurance. The insurers have all of the leverage.
Really interesting to hear this, Brian. Yeah, I wonder how many people are just taking that increase without any knowledge or tools to argue against it. Good for you. I’ve heard that same roof scenario quite a few times. On a quasi-related note, just last night I actually started the process of blocking my house on Google Street View to enable one less way of looking at my home. It’s likely impossible to block satellite images of course. But with all this talk about insurance using AI and internet tools to investigate condition, I’d rather not be subject to that if possible. And for any onlookers, I know this likely won’t do anything, and I cannot block satellite images either. But as a consumer, I’m now thinking about stuff like this.
Okay my Friend, because of the world of internet and AI, I am writing from Maestre Italy, across from Venice. Not bragging or rubbing it in but when it comes to Ryan’s blog I don’t care if I was on Mars, I would read it.
I had (I) 1670 on my Bingo card. You can guess what the 1,670 is for and I am waiting to see what happens in August on renewal time. As Ryan and Bruce know I live out in the “country” so to speak on a small little Ranch. Oh, what fun is Insurance these days. You think insurance on the homes is fun you ought to try and get insurance on a horse ranch with boarders. You can’t believe the request on documentation and then the refusal. Makes the IRS look like a walk in the park.
Here is another little thought and no I am not under the influence of a good Chianti (Thank you Anthony Hopkins for that referral). If the insurance rates get any crazier who will be able to afford buying SFR properties. Try this one for size, our friends the Joint Venture Capitalist who already have over 200,000 homes under their control in CA. So, think about that little bit of insanity. Only in the land of sunshine, Sig Alerts, earthquakes and CA Fair. Hmmm not sure about the “Fair” part.
Last thought so what happens if there are two major fires in one year and one good size earthquake. I think we are in for the 6th largest economy in the world looking at bankruptcy. Just a weird thought from a guy who wears a Stetson. And yes, it is on too tight sometimes.
Wait, are you really in Venice? Now that is cool. Do they let cowboys go to Venice? Haha. I hear you on affordability. This is a significant issue that needs to get solved. I don’t think the housing market as a whole has had any sort of big inflection point regarding price and insurance, but it’s something we want to watch in certain markets.
Hope you’re having a great time. I expect to see pictures at some point.
Generally insurance companies raise rates, drop policies in certain areas after natural disasters like fire, landslide, floods, earthquakes… The new increases appear to be hitting non natural disaster areas more. Most no longer even offer earthquake and flood insurance.
I can understand the increase because of increase in construction materials, repairs and other insurance company related costs and overhead. They may also just be altering their portfolio of policies in order to optimize the most profitable ones. Maybe they are dropping home insurance policies alone and not policies bundled with auto and other insurance products. Maybe they’re just dropping policies in certain states and counties. It’d be interesting to know more about the causes.
You know, it would be really interesting to see who they are dropping. And to take it a step further, wouldn’t it be interesting to see if people are getting dropped at the same rate when considering location, economic background, wages earned, race, gender, etc…? I always wonder this about appraisal waivers too. Who is getting them? Who isn’t getting them?
hmmm… Economic disparity???Maybe insurance companies are actually bringing back “red lining”; whoda thunk?!?
I’ve never seen any evidence of that. I’m just thinking out loud about a system and what results are happening. There are so many layers here. I’d love to see an analysis on this if we were lucky enough to get data.
Regarding Redlining comment. With wildfire Litigation Support backdrop, maybe I am missing the connection on redlining unless there is a new definition. High end exposed as well, as homes in Malibu and Montecito have been tagged also, as major carriers walked very quickly away from these areas.
That’s not my language, but solid point. What I’d like to see are stats. That would be fascinating. Who is affected the most? That would be really interesting. I do have the same questions about appraisal waivers though. I hope somebody is running those stats and that they become publicly available at some point. If we are going to critique the humans, let’s be sure to critique the system also.
Highest home owners insurance of all time. Highest property taxes of all time. Highest home prices of all time =?
That’s a tough combo. Not the highest prices ever in Sacramento as we are down a few percent from the all-time high in mid-2022. In California as a whole though, we saw the highest-ever median sales price last month in April 2024.
Interesting post Ryan! Good stuff as usual. We have friends in Placerville whose homeowner’s insurance dropped them due to their location and risk of fire being too high to ensure. Their home is in very good condition. So, they are uninsured and hoping no fire wipes out their home in the future. That’s scary! They own their home and are going to have a metal roof installed to add more safety in the event that there is a fire. Hopefully the metal rood would protect the home from hot embers. For buyers, it’s got to be tough trying to get a mortgage on an uninsurable home.
Thanks for sharing, Jamie. There are SO many stories like this right now. I like the metal roof idea too. I dig the look. You know, you should visit your friends at some point so I can sneak over to Placerville to take you out for coffee. Would be great to catch up.
Interesting post Ryan. What stands out to me are how few Fair Plan homes are in Solano County. More than 100 homes were burned between Vacaville and Winters during the LNU Fire and Green Valley west of Fairfield almost burned several times. I would expect more problems getting insurance along the coastal ridges.
Thanks Joe. Hmm, that makes me wonder. I do think it’s fascinating to look at many counties like this and to have residents chime in. Also, many people in real estate are working in outlying areas today since there isn’t as much volume. Better know the market…. You know, speaking of Solano, volume has been down so far this year compared to other years. Not by much, but most local counties have been up a little.
We were cancelled after a ‘drive-by’ inspection and given a couple of weeks to remedy the oak tree branch overhang on detached garage, some cracks in driveway probably due to the oak tree, and a few other items (our home is on a large treed lot in Orangevale). We asked for more time which they granted, and then we took care of all and trimmed the tree as much as we could (it’s a heritage oak and protected). However, a couple weeks later we received a letter stating that we were being cancelled. Found another carrier at a higher price (of course). They are looking for ANY reason to cancel policies.
Thank you for sharing, Mary Lou. This is so frustrating, and there are far too many stories like this. I’m just waiting for this to happen to me. Our roof definitely has some life in it, but I had to repair some shingles this year after a big storm. Just waiting until that becomes an issue.
I am always looking for a silver lining…and here it is. Right now, in California, insurance companies are only allowed to use historical data to set their premiums. Remember the Dixie Fire, the Monsquito Ridge Fire, the mudslides, the flooding of the past 2 years? That’s what they have to use to set premiums. CAR is fighting for legislation which would allow insurance companies to project their costs according to future data. There has been a lot of measures to mitigate fires, which should improve the data. Let’s hope 2025 shows some relief if this legislation passes.
Thank you Paula. I really don’t know much about that. I’ll have to dig in to find out more. I appreciate you bringing this to the conversation. It’s been a rich thread this week with stories and nuggets to consider.
The CA Fair Plan only covers your home’s dwelling and your personal property if they are damaged from four named perils: fire, lightning, internal explosions and smoke. You have to get a wrap policy for everything else.
Thanks Ann.
Thanks Ann.