Government Shutdown Threatens Thousands of Daily Home Closings, New Report Warns

The ongoing government shutdown has disrupted the renewal of flood insurance policies, posing risks for prospective homebuyers and current homeowners in flood-prone regions.

Now entering its third week, the deadlock has left countless Americans in uncertainty during a critical hurricane season. The National Flood Insurance Program has been halted, as Congress remains unable to reach an agreement.

This impasse prevents homeowners and buyers from obtaining or renewing flood insurance through the program, leaving millions in vulnerable states like Florida, Texas, and the Carolinas without essential coverage.

Administered by FEMA, the program supports approximately 4.7 million policies across the nation, safeguarding over $1.3 trillion worth of property. Florida is particularly reliant on this program, holding nearly 1.8 million policies, which account for over a third of the national total.

Lenders also can’t close on homes without flood insurance. The National Association of Realtors estimated a similar freeze in 2010 stalled about 1,400 closings a day.

A recent report from mortgage lender HomeAbroad estimated more than 3,600 sales could be at risk daily, with billions in deals already on hold.

Anthony Smith, a senior economist at Realtor.com, told the delay could further shake an already volatile housing market.

“What we will see is that if this really lasts longer and longer, that there’s going to be a significant backlog,” Smith said. “Beyond that, it’s also going to be impactful to consumer confidence, and this is going to bring some more cooling effects to an already chilly housing market.”

Private coverage is an option in major cities and coastal areas, but inland homeowners have far fewer choices if a major storm hits.

Buyers relying on programs under the Federal Housing Administration and the Department of Agriculture key lifelines for first-time and rural homebuyers are also on pause as federal staff remain furloughed, which can stop a sale from closing altogether.

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