Residential Real Estate News
If U.S. Congress Does Not Extend NFIP Soon, Thousands of Daily Home Closings Impacted
America's National Flood Insurance Program (NFIP) is authorized to operate until 11:59 p.m. on March 14, 2025. To prevent a lapse in the program, Senator John Kennedy introduced a bill (S.824) on March 4, 2025, aiming to extend the NFIP's authorization. This bill is currently under consideration by the Senate Committee on Banking, Housing, and Urban Affairs.
Historically, Congress has enacted multiple short-term extensions to ensure the NFIP's continuity, with 32 such extensions since its last five-year reauthorization expired in 2017. Given this precedent, it is anticipated that Congress will pass the necessary legislation to reauthorize the NFIP before the March 14 deadline, thereby preventing any interruption in the program's operations.
Failure to reauthorize the NFIP by the deadline would result in the program's inability to issue new or renew existing policies, potentially impacting property transactions in flood-prone areas. However, based on past actions and current legislative efforts, it is expected that reauthorization will occur in a timely manner.
Without the National Flood Insurance Program (NFIP), property owners and buyers must depend on the private insurance market, which lacks consistency in offering flood coverage, according to the National Association of Realtors (NAR). This creates a significant challenge for homebuyers in FEMA-designated Special Flood Hazard Areas (SFHAs), where lenders require flood insurance as a condition for mortgage approval. Consequently, buyers in flood-prone areas may experience delays in closing their loans while securing coverage. If these delays are prolonged, some contracts may expire, forcing buyers to renegotiate or withdraw from the sale. From a seller's standpoint, this leads to extended listing periods and increased market uncertainty.
The NAR estimates that the NFIP is crucial to the completion of approximately 1,360 home sales each day, impacting about 41,300 transactions per month nationwide. While the effects vary by state, Florida's housing market stands to be most affected, followed by Texas and California. In Florida alone, an estimated 14,870 home sales per month could be delayed or canceled. Meanwhile, in Texas and California, the uncertainty caused by an NFIP lapse could disrupt 3,590 and 1,680 home sales per month, respectively.
Economic Impact
The housing market plays a critical role in driving economic activity. Beyond facilitating homeownership, it stimulates economic growth by contributing to gross domestic product (GDP) through construction, home sales, and renovations. These activities not only require labor and materials but also generate demand across multiple industries, including construction, manufacturing, and retail. Additionally, home purchases--especially of older properties--often prompt further consumer spending on renovations, furniture, appliances, and home improvement services.
The economic ripple effect extends even further. The development of new homes and the renovation of existing properties create jobs for architects, builders, and interior designers. The real estate industry itself employs a vast network of professionals, including agents, brokers, and mortgage lenders. A strong housing market, therefore, helps lower unemployment and increase household incomes.
Based on income estimates from home sales in each state, the NAR projects that an NFIP lapse could result in annual income losses totaling $69.7 billion--roughly equivalent to Alaska's entire GDP. Florida ($23.0 billion), California ($5.5 billion), and Texas ($4.9 billion) would experience the most significant local income losses.
Given the scale of these economic consequences, ensuring continued access to reliable flood insurance is essential--not only for homebuyers and sellers but also for broader market stability and economic growth.
