Pacific Palisades Aftermath

America's insurance implosion continues.

The 2024 Pacific Palisades firestorm destroyed 6,837 structures and killed a dozen people. The last resort California FAIR Plan is functionally bankrupt, but the legislature will concoct some scheme to revive it. The insurance companies, having taken the homeowners’ money, are fleeing their agreed responsibilities.

What is a house worth? Here in California, much more than the cost of construction per square foot. The market will naturally adjust to the point where homes are affordable; those which are unaffordable sit empty. The grim issue here are homes that were formerly affordable, but which have long term owners. People don’t pack up and leave when the insurance is too much to bear, they cross their fingers and hope the next inferno takes the other side of the hill in their back yard, and not theirs.

We have a lot of places here that got built in the prior century. Then the Cedar fire of 2003 smashed the illusion of safety. Most of the ten years I’ve been in California have been here in the north - the San Joaquin and Sacramento river valleys, and now East BARTopia. The insurance rate on my hut tripled last year. Last summer we had a spontaneous start in our back yard - a clear beverage bottle tipped into a planter in the back yard, and was forgotten. The next afternoon it focused the sun. A single saucepan full of water caught that tendril of smoke before it wiped out 200 homes and the state lands in the back yard. I became far more diligent in my watering duties.

We are not in the same grim situation that China faces, where 70% of personal savings are in real estate, and wild fringe outlets, such as Bloomberg, are claiming that there are eighty million unsold units. That’s perhaps an 8% overbuild, so double or triple or subprime problem in 2008. Unlike America in 2008, where the market took the weak, and the banks received a galling but necessary bailout, the estimate of the haircut awaiting these speculative home owners might be as high as 90%. Imagine how America’s Baby Boomers would react to receiving a dime on the dollar for their life’s work. Chinese companies have been forming militias, akin to our National Guard in some ways, but they’re citing “social cohesion” as the driving force behind this move.

When presented with a choice, the hedge fund parasites running the Trump administration are going to side with the money, not the people. Sharing the risk of living here, and the inevitable cost of rebuilding, will be denigrated as “communism”.

When insurance is gone, the value of a home tumbles to the most someone living in it is willing to lose. I am just a renter. The ownership my income can support involves crusty boats in need of much elbow grease and RVs from the prior century. This has been my lot in life for most of the 21st century, I can scarcely remember a time where the place I lived was exclusively mine. Should life bestow another zero to my income, the boat would gain ten or fifteen feet, the RV would be a bit roomier. I could see owning some land, a plot in the California delta, a place with a dock and trees to shade the RV. I accept that things in my life are transient, I’ll waste no time resisting impermanence.

There are others like me, at either end of the socioeconomic spectrum, but the vast majority of us are more settled. It won’t be long before that “are” gets replaced with a “were”. Mother Nature does not heed public opinion polls. The droughts and fires and floods and hurricanes are going to accelerate.