13% of California real estate transactions now fail because buyers cannot obtain homeowners insurance at any price

In California, 13% of Realtors reported that at least one sale fell through in 2025 because the buyer could not secure homeowners insurance -- nearly double the rate from the previous year. Real estate agents report deals collapsing when insurance quotes exceed $10,000 per year, but in many wildfire-adjacent areas the problem is not price but availability: no admitted insurer will write a policy at all. The buyer's only option is the FAIR Plan (fire-only, no liability or theft coverage) supplemented by a DIC policy, and even those are becoming harder to obtain as the DIC market thins. The cascading financial damage is severe. When a sale falls through, the buyer loses inspection costs, appraisal fees, and potentially their earnest money deposit. The seller loses their contract and must re-list, often at a lower price because the market has now signaled that the property is hard to insure. If the seller has already purchased their next home contingent on the sale, they face bridge loan costs or the risk of owning two properties. Mortgage lenders who have already underwritten the loan and locked rates lose that business. For the broader housing market, insurability has become a shadow pricing mechanism. A home's value is no longer just about location, size, and condition -- it is about whether an insurer will cover it and at what cost. Properties in areas where State Farm, Allstate, and other major carriers have pulled out trade at a discount that reflects the insurance gap, even if the physical home is identical to one in an insured neighborhood five miles away. This creates a two-tier real estate market where insurance availability, not housing fundamentals, determines property values. This problem persists because California's insurance market is caught in a regulatory trap. For decades, Proposition 103 prohibited insurers from using forward-looking catastrophe models in rate setting, forcing them to price based on historical losses. Insurers responded by exiting rather than writing policies they believed were underpriced for the risk. The state's Sustainable Insurance Strategy now allows catastrophe models but requires insurers to expand coverage in high-risk areas in exchange for rate increases -- a process that is just beginning in 2026 with early filings from Mercury, Farmers, and CSAA. The gap between insurer exits and insurer re-entry has created a years-long coverage desert.