Here’s How a Government Shutdown Could Stall Thousands of Home Sales

Even a brief cut-off in funding to a key federal flood insurance program could cause big problems for property sales, housing industry officials warned as the U.S. government faced a shutdown this weekend. 

The National Flood Insurance Program (NFIP) will lapse unless Congress passes a broad federal government funding bill before Saturday’s deadline. The Senate is considering a budget that would keep the federal government funded through September. If Democrats move to block the bill, funding for several key government programs, including the NFIP, could be ended while the government is shut down.

“Builders need to be aware that even a short-term disruption to the program will force delays—and in some cases, cancellations—to home sales and multifamily transactions that require federal flood insurance under the NFIP,” the National Association of Home Builders warned in a post on its website.

Flood Coverage Needed For Thousands of Sales, NAR Calculates

The NFIP provides flood insurance to homes in specially designated areas that are prone to hazardous floods and where few private insurers offer coverage.

The National Association of Realtors estimates that NFIP coverage is used in 1,360 home sale closings daily, with markets in Florida, California and Texas the most reliant on the coverage.

Delays in closings would come as housing sales have already been slow due to high mortgage rates and rising home costs. High insurance costs have also been an issue for homeowners. 

“Property sales and loans could be delayed or halted nationwide in many flood zones if private flood insurance is unavailable,” NAR Senior Economist Nadia Evangelou wrote. “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.”