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The National Flood Insurance Program (NFIP) must be periodically reauthorized by Congress in order to continue issuing or renewing flood insurance policies. In 2010, multiple lapses in program authority brought uncertainty and caused major issues for homeowners in neighborhoods across 22,000 communities nationwide. Delays in home sales closings —or even worse, cancellations— are expected to occur in these areas if there is another lapse in the program.
NAR recently updated and expanded upon its earlier analysis to estimate the number of home sale closings that could be delayed or cancelled, should there be another lapse in the near future. This analysis confirmed NAR’s earlier estimate that approximately 40,000 transactions are at stake each month of a lapse. Further NAR analysis breaks out the nationwide estimate to present the share of transactions impacted on a state-by-state basis.
Analysis
First, we calculated the number of housing units, which are located in a 100-year floodplain called Special Flood Hazard Areas (SFHAs). The Federal Emergency Management Agency (FEMA) publishes the National Flood Hazard Layer (NFHL), which enables us to determine the flood zone, base flood elevation, and floodway status for a particular location. Meanwhile, the 2010 Decennial Census includes the housing units count for particular locations. Overlaying these two datasets, we estimated the share of housing units in a 100-year floodplain.
The American Community Survey estimates the number of owners who moved into their home within the last 12 months. Applying the share of housing units in a 100-year floodplain by location to the 2016 ACS estimates, NAR estimated the number of home sales affected by a NFIP’s lapse for each state.
Main Findings
Nationwide, it is estimated that for each day that NFIP lapses, approximately 1,330 home sale closings will be delayed or cancelled. On a monthly basis, NAR estimates that each lapse would jeopardize about 39,900 closings across the nation (35,000 – 45,000 home sale closings).
Statewide, Florida’s housing market will be most affected by a lapse of the NFIP, followed by Texas and California. On a monthly basis, it is estimated that 13,460 homes sale closings will be delayed or cancelled in Florida while a lapse of the program will bring uncertainty to 3,140 and 1,840 home sale closings in Texas and California, respectively.
The map below allows you to see the impact of a lapse of the program for each state:
