"Witnesses on the morning of April 18, 1906, described the city’s streets as rising and falling like a ribbon carried by the wind."
"one out of every four buildings in the Bay Area might not be usable after a magnitude 7 earthquake"
"At a time when the average price of a home in San Francisco is above $1.2 million..."
Why aren't people pricing in an earthquake discount? This is so totally irrational, housing in SF should be cheaper given the certain risk of an earthquake and consequent large probability of severe damage. And even if your house isn't destroyed, good luck finding a contractor post-earthquake. Even now contractors are so hard to find, over priced, and many do shoddy work, I can't imagine why people don't see this coming and stop paying this much for something that may fall down any day now.
> Why aren't people pricing in an earthquake discount?
Similarly why we continue to build in floodplains, it's usually fine and when it's not the Federal government steps in and makes sure people are bailed out. This has proven to be a good strategy as long as you're not in Puerto Rico. It's the same idea as the "Greenspan put" being priced into the financial markets.
> when it's not the Federal government steps in and makes sure people are bailed out.
This may be a conservative talking point but it seems more likely that such disasters happen on timescales humans aren't built to reason about. Even if there were no bailouts I doubt things would be any different. These areas have desirable attributes that make them attractive regardless of the risk. There are also precious few areas not subject to any risk at all (a large portion of the continental USA is subject to hurricanes, tornadoes, earthquakes, blizzards, or other potential disasters).
> Why aren't people pricing in an earthquake discount?
Because it's a matter of insurance, and thus reduced to a recurring premium bill.
Why not price all maintenance costs and electricity too? Living in this house for the next fifty years will cost you all these utility bills; you should get a discount from the purchase price to reflect that! :)
Few insurers offer earthquake insurance, and those who do charge very hefty premiums, we're talking about adding 50% to the cost of your mortgage over 30 years. Hence, a very small portion of the housing stock in SFBA is insured against quake damage.
I still want to know why people aren't thinking about this when they pay so much for a house.
I'd think that 11% of CA homeowners is large enough that you have already hit the economies of scale and the price is largely a factor of risk. Quintupling that number is not going to reduce the price.
The number won't quintuple unless the price is reduced. Of course if 89% of the people were cheerfully willing to pay what the 11% are paying, then the price wouldn't change. And in that imaginary world, 89% would be covered.
The question is why don't the insurance people work a bit harder to broaden the coverage; they could make more money even at a lower price point.
Perhaps, those who are not covered are too resistant; they are not willing to get the coverage even at a reasonable price because of the way they perceive the risk/benefit. So that is to say, maybe it's a "hard sell".
"one out of every four buildings in the Bay Area might not be usable after a magnitude 7 earthquake"
"At a time when the average price of a home in San Francisco is above $1.2 million..."
Why aren't people pricing in an earthquake discount? This is so totally irrational, housing in SF should be cheaper given the certain risk of an earthquake and consequent large probability of severe damage. And even if your house isn't destroyed, good luck finding a contractor post-earthquake. Even now contractors are so hard to find, over priced, and many do shoddy work, I can't imagine why people don't see this coming and stop paying this much for something that may fall down any day now.