Home Buying in 94501>Question Details

Joe Fleane, Home Buyer in San Francisco, CA

How does it make sense to buy in CA, given the possibility of getting wiped out by an earthquake?

Asked by Joe Fleane, San Francisco, CA Sat Feb 21, 2009

Earthquake insurance is expensive, has high deductibles, and is not very reassuring as the insurance companies are free to just go bankrupt if there's an earthquake. I've been told FEMA may step in, but I wonder when, how, and to what degree? You'd be at the mercy of bureaucrats. Will you qualify? What if the house fits into some category of not damaged enough/not damaged in the right way/not in exactly the right spot and you can't get any money from the gov.

If you're rich and can afford to lose a house here and there, OK. But otherwise you could wind up owing hundreds of thousands on an uninhabitable pile of rubble. Why are people willing to do it? What is the logic?

I guess it's a gamble that people are willing to make to enjoy living in CA. I'm just wondering if there's a rational, non-emotional analysis where it makes sense.

Help the community by answering this question:


The answers posted to this question are hilarious. Nobody came close to answering the question, which is how does it financially make sense to live in CA. Answer, it doesn't. The earthquake issue being one of the reasons, but not the only reason. Most people delude themselves with all these statements of why CA is so great, and make themselves feel better, but you really hit the nail on the head with your question, and that's why you didn't get any direct answers other than something like.
"And I'm telling you....I'm not going.
This is the best state I've ever known,
There's no way I would ever go
No, no, no, no, no way
No way I'm leaving ..."
When there is an earthquake, and it wipes out LA or SF, "don't worry be happy" might not cut it.
Anyway, I live in SF for the last 7 years, and it's pretty good, although once you live there for awhile it's just like anywhere else really... but I plan to move to Chicago when I buy next year, which is also pretty good, and with the $12-14 k in state income tax I will save per year, I can pay for some pretty nice vacations.
But the reason you got all these type of non answers, is because these are the answers you generally get from people who generally think CA is the greatest. But yes the weather is nice.
1 vote Thank Flag Link Mon Jun 29, 2009
If that property were an investment property, then the insurance costs and deductibles, inspections, appraisals, surveys, repair costs, and maintenance costs are all operating expenses--hence they'll offset your gross revenue (which might yield you a healthier profit).

If an earthquake were to completely level the improvements (ie the building) on your property, then you could always clean up the rubble, rezone your property, and resale your property to a developer--perhaps for a profit.
2 votes Thank Flag Link Sat Feb 21, 2009
Hello Ebdb when it comes to earthquake insurance you have to consider the costs and risks. The cost is a lot if your looking at a house that is in the 750k to 1mil range your looking at a premium of 5000 dollars or more a year for earthquake insurance, that insurance will have a huge deductable sometimes as much as 35 thousand dollars. Also have to look at what is not covered, usually the policy does not cover broken glass, fireplaces, cracked plaster etc. The best way to look at it is coverage is that it is good if you think your going to have a total loss of the property. I personally don't have earthquake coverage but I have spent money doing sysmic retrofitting. Again it just goes back to how risk averse you are. As for the viabilty of the insurance companys I don't know what to tell you. Good luck.
Web Reference: http://Troystaten.com
1 vote Thank Flag Link Sat Feb 21, 2009

You can pick your poison with most of the attractive places to live in the country and world.
coastal erosion
excessive cold
excessive heat
global warming
volcanic activite

And the list goes on and on.........

I often wonder, what is the safest location?
1 vote Thank Flag Link Sat Feb 21, 2009
If you were my client I could attempt to quantify your question and reduce it to a risk algorithm, but at the end of the analysis it's an emotional decision for you. "Can I sleep at night as a result of this decision?," is how a very successful real estate investor described his final gut check to me.

In all candor, I suggest that your most logical answer is to keep renting locally and make an investment elsewhere. Then you are avoiding the uncertainty of a local purchase.

However, you may be shifting the uncertainty to a different investment of different location with a different set of uncertainties. It's why securities investors diversify their investments, why venture capitalists put 10-20 start ups into a portfolio, why we were told as children not to put all our eggs into one basket.

FULL DISCLOSURE: I make most of my living on the commissions from buying an selling properties, and some of my income on development, so what I just suggested doesn't make me a penny, but if you were my client I would have a fiduciary responsibility to help you understand and evaluate your choices. At the end of the day, you have to make your own decision, but at least you can sleep with it.

I'd appreciate the opportunity to help you reach that decision
0 votes Thank Flag Link Mon Aug 16, 2010
I have lived in Alameda all my life. I am over 50. In my lifetime the 1989 earthquake was the worst and scared me a little bit. I have to say that we had very minimal damage in Alameda. Some Chimneys cracked, some buckling of sidewalks behind the tube and some on the Nava Air Station. Some pools in condo complexes had cracks and elevators had some problems. We led a fairly normal life compared to the other surrounding cities. All utilities remained working. When I went to the dentist is Oakland a few months later, I took the stairs and there were very large cracks in the walls. Yes the Bay Bridge and freeway collapsed which was a tragedy. If one listens to the news, many states throughout the US were in the state of emergency status because of floods, tornadoes and hurricanes. More than once in a year these states had to rebuild. I will take my chances here in Alameda anytime. Most do not have earthquake insurance because it is too costly and the deductible is so high that each homeowner will probably not get enough money to replace their home anyway.
0 votes Thank Flag Link Wed Aug 5, 2009
Helle, Ebdb:

Perhaps this is way late in answering your question regarding the Earthquakes issue and buying in California, however late, here are my thoughts,.

Earthquake, tsunamis, volcanic eruptions, twisters, avalanches, landslides, floods, too many natural disasters to name.

How about urban problems, murders, rapes, robberies, etc, etc. Shall we go on?

Bad stuff happens. Where is one to live?

Yes, we may have earthquakes in California. But, California, is not the only place that natural disasters can occur.

You have too many fears. Get over them. Live life because it's fun, not because you need insurance against what could 'possibly' happen.

If you want to live in California, do it. We may not have an earthquate for another 150 years, ha, ha, hahaha!

There are so many of us that enjoy the sheer pleasure of this great state. I've lived in the Bay Area (yes, on the San Andreas fault) since 1947. OMG, that sounds so frigging long! I assure you that I do not live in fear.
Be brave. Come and join us. Sometimes the quality of life is more important than a good investment.

OBTW: Bureaucrats do not dictate natural disasters.
0 votes Thank Flag Link Wed Aug 5, 2009
I recently saw a study they did on natural disasters. They said that the most deaths from natural disasters come from ..... Heat Waves. They said heat alone kills more than hurricanes, tornados and earthquakes combined. We are so scared of the huge natural disasters but in reality very few people are killed by these disasters. If you're really concerned about natural disasters make sure you buy a house with an A/C unit. Four generations of my family have been born and raised in CA and so far not a single one of us has lost a house to an earthquack. I think your fear is totally unfounded and irrational. Have you looked up statistics on earthquakes? Try google and look them up. I think you will be suprised at how many familys have lived here and not lost their houses.
0 votes Thank Flag Link Tue Mar 3, 2009
Hi Ebdb,
Firstly, I am a full time Realtor with Coldwell Banker in Cupertino.

But, I am also a Public Safety Commissioner with the City of Cupertino. I teach Earthquake Preparedness as a volunteer with the Office of Emergency Services- City of Cupertino. YES, i understand where you are coming from. I came to CA from Sydney, Australia.When I arrived here, i heard all about the constant earthquakes CA experiences, and that its only time before we will experience a "big one!". We came here with the job, and planned to settle here with our kids. So,practically for me, since I wasnt going to be able to control an earthquake, the next best thing was to be fully, as best as possible, be prepared to go thru the "big one!" So thats what i did...........contacted the OES in Cupertino, to renew my First Aid and CPR certificates, learnt all about other trainig, prep for earthquakes i could take....and one thing led to another......and now I teach in classes and in neighborhoods as a volunteer.
It makes sense buying, as for me, personally, Renting is "dead money" . I bought in 2 months of landing here as i wasnt going to rent and pay someone elses mortgage for them! Just a choice you make in the area you live and work in, practical, as you have to "live your life" without being scared. Yes it could be an earthquake that flattens my home, or then a freak accident like when that plane landed on a home just a week ago!
If nature wants to throw you a challenge, lets deal with it when it comes. Meanwhile, dont worry, be happy :O)
Most homes in CA are retrofitted for earthquakes, they can shift/sway and settle back in, you will be fine!
You can always get a property that is 1/4 mile away fro a fault line!

If you need to talk things through, give me a call, lets catch a coffee and lets talk earthquakes and Real Estate. Meanwhile, be well and safe,
Nina Daruwalla
0 votes Thank Flag Link Sun Feb 22, 2009
Actually,the most vulnerable spot for earthquakes right now seems to be Arkansas. And people there are not in any way prepared.
0 votes Thank Flag Link Sat Feb 21, 2009
I have been here more than 35 years and haven't lost more than 1 picture, that fell off the wall. Can't live your life being afraid of the "what ifs". there are a lot of other places that have worst disasters. I quit have earthquake ins. I paid more than I'd every get back. If you find the perfect spot that has no danger, let the rest of us know.
0 votes Thank Flag Link Sat Feb 21, 2009
I linked Ebdb to your Blog Dp2 when he asked his first question about investing, but natural disasters seem to be his perferred topic. Look all his questions............Good to see you around..

If you don't mind, l have a question I'd like to ask you on your Blog.

0 votes Thank Flag Link Sat Feb 21, 2009
It seems you have your mind made up. I hope you find a state in which you feel comfortable in purchasing a home. California is still on the map and most likely will stay there for many years. I am sure Mr. Spock would logically say the same thing. As a matter of fact I believe he owns property in CA.
I wish you well...
0 votes Thank Flag Link Sat Feb 21, 2009
Thanks for the answers, folks. However, I did not ask to have my emotional state evaluated. To repeat, my question was:

"I'm just wondering if there's a rational, non-emotional analysis where [buying in earthquake country] makes sense."

Here is what I mean by "rational analysis"...

"Yes there's a risk, but it can be measured [insert statistics and sources]. Compared to other investment options that's not so bad."

"Yes there's a risk, but you can mitigate it by doing XXX and YYY."

"There's a risk, it's unmeasurable, and realistically there's no way to mitigate it. If you buy in CA you take your chances."

To me this is a purely economic decision which I'd like to make as rationally and logically as possible. Imagine that Mr Spock were asking the question. As first officer on a Starship he makes about $80,000 a year. He has about $90,000 in savings.

He's looking to buy his first house and is considering California's Bay Area because Starfleet Command is headquartered in San Francisco. But on the other hand, he's not a big risk taker. And doesn't mind renting or buying outside the Bay Area if that makes more sense logically.

Don't bother accusing Spock of being "scared" or "judgemental" or anything else because he's Mr Spock! He simply doesn't care.
0 votes Thank Flag Link Sat Feb 21, 2009
I believe you are correct,. the people who are judgmental on purchasing a home is because of fear. They usually do not have the money or credit to purchase and would rather judge. If the public wants to continue renting instead of purchasing (and this is tihe time to buy) then let them. They are losing out on great opportunities right now and the landlords are coming out ahead by letting them pay for their mortgages.
0 votes Thank Flag Link Sat Feb 21, 2009
Logic ,in this case, sounds more like fear. Buy some land and live in a tent if you're afraid of earthquakes. Those flexible pole rods can withstand a lot of shaking. I think most of us are willing to roll the dice on a home because in the long run it may pay for our kids college tuition, or provide a decent nest egg. I also like to be able to do whatever I want to my home and most of the time nobody can say a thing. The stud and nail construction of most of our homes is also a very flexible method. These homes may bend but, they don't crumble. Also, paying somebody else's mortgage used to really make me angry. If you just can't bring your self to buying a home in CA, then continue to rent and buy some rental property in a city you are comfortable with. Maybe a college town. It is a well known fact that most of the well off people in this nation (who didn't invent something incredible) did it through real estate.
0 votes Thank Flag Link Sat Feb 21, 2009
Very interesting question. I have lived in Alameda all my life. During my lifetime we have had only 1 major earthquake in 1989. that one did scare me. In my city we had very little damage. All of our utilities remained on, some chimneys cracked, Some condo pools had cracks and some buckling in pavement behind the tube. Every state has Mother Nature's disasters. After seeing all the homes lost, people losing their lives with disasters of floods, tornadoes and hurricanes in most of the USA this last couple of years, I will take my chances in California anyday. I think it makes a lot of sense to buy in California.
Web Reference: http://www.jeanpowers.net
0 votes Thank Flag Link Sat Feb 21, 2009
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer