AUSTIN – (By Dale King, Realty News Report) – The National Flood Insurance Program (NFIP) is easy to define, but its impact requires a bit more explanation.
The National Association of Realtors (NAR) took up that descriptive task. And after completing a full analysis of the flood insurance effort, deemed NFIP critical not only to the stability of the real estate market, but also to America’s financial well-being – locally and nationally.
Without NFIP, “property sales and loans could be delayed or halted nationwide in many flood zones if private flood insurance is unavailable,” said Nadia Evangelou, senior economist at NAR and director of real estate research who produced the report. “This disruption would not only affect buyers and sellers, but it could also create a ripple effect on the broader real estate market, related industries and the economy.”
Established by Congress in 1968, NFIP provides affordable flood insurance to property owners and encourages communities to adopt and enforce floodplain management regulations to reduce future flood damage.
In her report, NAR’s Evangelou explains how the NFIP not only protects property but keeps the housing market and the U.S. economy financially pumped.
- NAR estimates that the NFIP is essential to 1,360 home sale closings daily. If it were to lapse, some 41,300 monthly transactions would be negatively impacted nationwide.
- While the situation varies by state, Florida’s housing market would be the most affected by an NFIP lapse, followed by Texas and California.
- On a monthly basis, about 14,870 home sale closings would be delayed or canceled in Florida. At the same time, a program lapse would bring considerable uncertainty to 3,590 and 1,680 home sale closings in Texas and California, respectively.
- After estimating the income generated by every home sale for each state, NAR estimated that without the NFIP, total income losses could reach $69.7 billion per year – a figure nearly equal to Alaska’s GDP.
- Florida ($23.0 billion), California ($5.5 billion) and Texas ($4.9 billion) lead the list with the largest local income losses per year resulting from an NFIP slip.
Without the program, property owners and buyers would be forced to depend on non-government insurance which does not offer flood insurance in many parts of the country.
“This presents a significant challenge for home buyers purchasing in FEMA-designated Special Flood Hazard Areas (SFHAs) because lenders require flood insurance as part of the mortgage approval process.”
“As a result,” she added, “many buyers in flood zones may face delays in closing their loans while waiting for flood insurance to be secured. Some contracts may expire if the delay lasts too long, causing buyers to renegotiate or withdraw from the sale.”
“From a seller’s perspective,” she pointed out, “this results in longer listing times and added uncertainty in the market.”
But woes associated with obtaining appropriate flood insurance don’t stop at the door of real estate agents and mortgage brokers, said Evangelou. “The housing market is a significant driver of economic activity. Beyond its primary function, the housing sector initiates a series of activities that propel economic growth, contributing to gross domestic product (GDP) through construction, home sales and renovations.”
All these activities, she noted, “require labor and materials. They also stimulate production and job creation across multiple industries such as construction, manufacturing and retail.
“Furthermore,” she said, “home purchases — particularly those involving older residences — typically trigger additional consumer expenditures.” New homeowners often dole out cash for home improvement projects, furniture, appliances and services to personalize and update their living spaces.
But it doesn’t end here, she said. “Construction of new homes and renovation of existing ones requires labor, which creates a wide range of jobs — from architects and builders to interior designers.”
And the real estate business itself generates a multitude of employment opportunities – such as agents, brokers and mortgage lenders.”
“Thus,” she said, “the ripple effects of a booming housing market can substantially reduce unemployment and boost people’s incomes.”
Given the scale of these economic effects, the NAR analysis states, ensuring stable and reliable access to flood insurance is crucial — not just for those buying and selling homes, but also for maintaining broader market and economic stability.
March 13, 2025 Realty News Report Copyright 2025
Photo: By Ralph Bivins, Realty News Report, Copyright 2025
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File: National Flood Insurance Keeps Realty Afloat FEMA National Flood Insurance Keeps Realty Afloat NFIP