But rate uncertainty threatens real estate market
By Michael Abdy, Housefax President
Housefax commends the National Association of Realtors’ (NAR, www.realtor.org) efforts to ensure affordable flood insurance for homeowners through the NFIP (National Flood Insurance Program). Keeping flood insurance widely available at affordable rates helps to protect more properties, which in turn allows for a more fluid and orderly real estate market. However, after recent floods around the country and the legacies of Hurricane Katrina and Superstorm Sandy – the two most costly water-damage disasters in the nation’s history – premiums for flood insurance are rising sharply.
Last year, the NFIP was forced to borrow from the Treasury, which has further complicate efforts to keep rates at reasonable levels. NAR is recommending a number of interim measures for FEMA (the Federal Emergency Management Administration) to ensure that the NFIP continues to keep premiums low and accessible. But even with affordable flood insurance, it’s difficult to make a blanket recommendation that all homeowners should buy such policies, as conditions and threat levels vary dramatically between regions. However, with the recent “100-year floods” in Colorado, we’ve seen that water damage can cause devastation to homes that weren’t considered at risk, or even close to any flood zones. Many homeowners did not choose to purchase flood insurance, of course, yet experienced major, uninsured losses that they never expected. Prior to this disaster, they simply did not feel the need to protect their properties with expensive flood insurance. Many of these people have been left literally homeless, with no remedy to recover their loss, and often with no ability to re-enter the real estate market as homeowners ever again.
Whenever considering making an offer on a home, we recommend doing your own due diligence with a Housefax Property History Report to see if the structure is located in or close to a flood zone. It will also list any major catastrophes that occurred including floods (and soon we’ll have available insurance records to show if a claim has been filed to repair flood damage). With the right “Buyer Aware” attitude and the right information, you can at least gauge whether there have been any incidents to the home itself, or to others in the area, to make a more informed purchasing decision for flood insurance.
In the meantime, risk levels have risen, and so have insurance rates. Situations vary by state and region, and change as well in relation to primary and secondary residences, elevations above flood levels, and other factors. As “The Voice for Real Estate” and America’s largest trade association, NAR is keeping up their good work with FEMA and by advocating for continued NFIP financial solvency and actuarial responsibility without harming the housing market recovery.