Wildfires are a trillion-dollar risk for housing: study

Potential damage from wildfires threatens residential real estate coast-to-coast valued at over $2.4 trillion, according to a ZestyAI analysis. 

The property risk analytics firm said over 4.3 million properties are at a high risk of damage from the blazes, including many homes east of the Mississippi River. The disasters are one of the housing market's most prevalent threats, and their impact on the mortgage market has been most recently evident following devastating wildfires in the Los Angeles region. 

The ZestyAI analysis examined 126 million structures in the contiguous U.S., and combined satellite imagery of landscape and vegetation conditions with historical data and other unspecified risk factors. The values were determined by multiplying at-risk properties by each state's median home values, which placed some less-populated states ahead of larger ones.

California alone has over 1.5 million at-risk properties for a total wildfire exposure of $1.21 trillion, given a median home value of $785,000. Western states filled the top-10 at-risk areas, but Florida ranked ahead of a few midwest states with $68 billion in residential property in wildfire danger.

Higher home prices have multiplied damage estimates and strained homeowners insurance markets, with much coveted real estate or structures sitting near undeveloped vegetation within what Corelogic defines as the wildlife-urban interface. 

Many high-priced Los Angeles-area homes match that description, and experts estimate billions of dollars worth of mortgaged-property within that disaster zone. While the servicing impact of those recent blazes is yet to be seen, Redfin has revealed some early evidence of increased area home purchases falling through. 

Some market indicators suggest consumers are beginning to think twice about moving to high-risk properties. Severe weather has been a factor in fading Florida condo prices, while the majority of homeowners in a recent Maxwell survey suggested rising premiums could lead them to relocate. 

Homeowners could also be overlooking risks in their own backyards besides other visible disasters like tornadoes, hailstorms and straight-line winds. A previous ZestyAI analysis found almost half of residential properties nationwide have at least one additional structure besides their home, which could pose even further challenges for homeowners insurance.