Wildfires erupted in western part of America and spread across acres of land because of hot and dry weather.
If videos on social media are believed to be true, several key regions of USA including California are witnessing charred metal skeletons of cars and scorched trees everywhere. Ghastly blazes are spreading gusty hot winds across the affected areas. Considered as one of the most devastating wildfires in recent times, it has not only claimed hundreds of lives, but the overall economic impact is appalling. The article focuses on the horrific impact of wildfire on economy, especially real estate sector.
A California man is convicted for starting the fire as witnesses claimed he pushed a “flaming car” into a gully. The rest of the work was done by the current weather. California Fire incident commander Billy See said “the fire has been spreading at a rate of 5,000 acres an hour,” eventually leading to such a devastating outcome.
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According to the California department of forestry and fire protection: “Cooler temperatures and more humid air were expected to aid efforts in containing the fire, which remained 0 per contained.”
Now, the battle is between raging wildfire and relentless efforts of thousands of firefighters.
Evacuation order has been given for counties including Paradise due to the Park Fire, which is burning about 90 miles north of Sacramento.
“In Oregon, several fires were also burning, including the Durkee Fire, which had scorched more than 288,000 acres in the eastern part of the state,” according to BBC report.
Be it climate change-driven or man-made, wildfire is always associated with economic impact if not contained at initial phase. As per new congressional report, “Climate change-fueled wildfires” cost “between $394 billion to $893 billion” of US economy annually.
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The new report from the Joint Economic Committee, chaired by Democratic Sen. Martin Heinrich of New Mexico, evaluated a vast ranging impact of wildfire damage, including real estate value, premature mortality of human and animals, health risks, loss of income and so on. Heinrich said: “There’s always been this frame from some policymakers that we can’t afford to do anything about climate change. And the reality is, the real costs to our economy are to not do anything about it, and let this run away to an even worse outcome down the road.”
Shockwave to Real Estate Sector: The most affected sector is real estate and home ownership. The above-mentioned report mentioned: “real estate has suffered anywhere from $67.5 to $337.5 billion a year due to wildfires.”
The California State Fire Marshal divided the land area into 3 Fire Hazard Severity Zones (FHSZ) as ‘moderate’, ‘high’ and ‘very high’.
There has been a sharp decline in share of homes built in the ‘very high’ FHSZ over the last 15 years.
Moreover, “Building a wildfire-resistant home in California can cost an additional $2,800 to $27,100,” according to the Wildfire Today.
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Impact on Life Insurance Industry: The Joint Economic Committee report mentioned “insurance payouts for wildfire damage at $14.8 billion per year, and annual premium increases around $1.6 billion.”
The Climate Financial Risk report published by the White House Office of Management and Budget warned more severe wildfires in future.
“We analyzed 10 future climate scenarios and a wide range of projections for fire extent and fire suppression spending,” said Jeff Prestemon of the Forest Service Southern Research Station.
Due to rise in land and sea temperature, wildfires are spreading faster. The report mentioned more intensified wildfires in future.
The Domino Effect: In fire-prone areas of America, home insurance prices are increasing drastically. Even some insurers have stopped issuing new policies, citing “more destructive fires”.
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As a result, homeowners who have been paying higher insurance premium might face a tougher time to sell their homes. According to David Jones, the former California insurance commissioner: “It stands to reason that if you’re a homebuyer, you’re going to ask the question, what’s it going to cost me to insure this place, and can I get insurance?” Jones told in a recent interview. “If the answer is insurance is really expensive and hard to get,” he added, “then homebuyers are saying, ‘I’m not going to pay as much for this house, because it’s simply not worth as much.’”
Rising risks of environmental disasters, enhanced costs, along with homeowner insurance premiums, add to the excess financial burden for house owners in vulnerable areas.
