How Effective Is National Flood Insurance? GAO Does an Audit

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By Kerry Smith, Florida Realtors

The government agency that oversees other agencies said that FEMA needs to inspect high-risk-flood communities more often – notably the ones in Fla. and Texas.

WASHINGTON – The U.S. Government Accountability Office (GAO) audits other government agencies to hold them accountable, and it recently completed an audit of the Federal Emergency Management Agency (FEMA) – and specifically the National Flood Insurance Program (NFIP).

Communities that participate in NFIP must mitigate possible flood damage, and rates are determined by how well they do that.

FEMA inspects communities to see how well they follow NFIP requirements. The visits include evaluations of recent construction. Until 2019, FEMA’s goal was to visit all communities considered to be high-risk for flooding every 5 years.

However, FEMA did not meet this goal in Florida or Texas in 2008-2019, citing a lack of resources according to the GAO. As a result, many high-risk communities received only one visit in this period – and some weren’t visited at all.

“Without regular monitoring, FEMA’s ability to ensure communities comply with requirements is limited,” GAO reported. Without the inspections, FEMA can’t track violations or deficiencies, or whether the community resolved earlier cited issues.

In Florida, the GAO found that records on visits remained open for years, and FEMA staff weren’t able to say whether that “indicated unresolved deficiencies or incomplete recordkeeping.”

One key problem GAO said was a community’s ability to assess damage on a property after a flood, and whether it’s damaged by 50% or more of its value to ensure it’s then rebuilt to current NFIP standards.

However, “FEMA generally does not collect or analyze the results of these assessments, limiting its ability to ensure the process operates as intended,” the GAO report said. “Furthermore, FEMA has not clarified how communities can access NFIP claims data. Such data would help communities target substantial damage assessments after a flood.”

The GAO made four recommendations to FEMA:

  • Assess different approaches for ensuring compliance with NFIP requirements

  • Ensure data on community visits are up-to-date and complete

  • Ensure communities collect data on substantial damage assessments

  • Clarify policies on data sharing between FEMA and NFIP communities

  • FEMA said it agreed with the GAO’s recommendations.

The text of the GAO report is available online.

© 2020 Florida Realtors®

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March Pending Sales Plunge 20.8%; NAR Calls It Temporary

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By Kerry Smith, Florida Realtors

The usual spring home-selling season took a hit due to the pandemic, but most experts consider it a bump in the road rather than a long-term change.

WASHINGTON – Pending home sales fell 20.8% in March – expected declines as a result of the coronavirus outbreak, according to the National Association of Realtors® (NAR).

The drop was widespread, and each of the four major regions tracked by the index saw drops in month-over-month contract activity and year-over-year pending home sales transactions.

The Pending Home Sales Index (PHSI) – a forward-looking indicator based on contract signings – decreased 20.8% to 88.2 in March. Year-over-year, contract signings declined too though not as much at 16.3%. An index of 100 is equal to the level of contract activity in 2001.

“The housing market is temporarily grappling with the coronavirus-induced shutdown, which pulled down new listings and new contracts,” said Lawrence Yun, NAR’s chief economist. “As consumers become more accustomed to social distancing protocols, and with the economy slowly and safely reopening, listings and buying activity will resume, especially given the record low mortgage rates.”

“The usual spring buying season will be missed, however, so a bounce-back later in the year will be insufficient to make up for the loss of sales in the second quarter,” Yun says. “Overall, home sales are projected to have declined 14% for the year.

“Although the pandemic continues to be a major disruption in regards to the timing of home sales, home prices have been holding up well,” Yun adds. “In fact, due to the ongoing housing shortage, home prices are likely to squeeze out a gain in 2020 to a new record high. I project the national median home price to increase 1.3% for the year, though there will be local market variations and the upper-end market will likely experience a reduction in home price.”

March pending home sales regional breakdown

The Northeast PHSI dropped 14.5% to 82.3 in March – 11.0% lower than a year ago. In the Midwest, the index decreased 22.0% to 85.6 last month, and it’s down 12.4% from March 2019.

Pending home sales in the South sank 19.5% to an index of 103.7 in March, a 17.8% drop from March 2019. The index in the West fell 26.8% in March 2020 to 71.4, down 21.5% from a year ago.

© 2020 Florida Realtors®

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Mortgage Rates Hit All-Time Low – 3.23%

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By Kerry Smith

The pandemic-slowed economy pushed the average 30-year mortgage rate to its lowest point in at least 50 years – since Freddie Mac started tracking rates in 1971.

WASHINGTON – The pandemic-slowed U.S. economy pushed the average 30-year mortgage rate to its lowest point in at least 50 years, according to Freddie Mac, which started tracking rates in 1971.

The size and depth of the secondary mortgage market is helping keep rates at record lows, Freddie Mac says. Today’s low rates are driving higher refinance activity and a modest uptick in demand for new-home purchases.

However, not everyone can take advantage of today’s low rates. In some cases, banks have tightened lending restrictions and are making loans only to well-qualified buyers or home refinancers. In addition, some potential homebuyers in January are now out of work as applications for unemployment skyrocket.

At 3.23%, the average 30-year fixed-rate mortgage is down 0.10% week-to-week (from 3.23%) and 0.91% compared to this same time last year.

The 15-year fixed-rate mortgage dropped to 2.77% this week. That’s down .0.09% from last week (from 2.86%) and down 0.83% year-to-year.

The 5/1 hybrid adjustable-rate mortgage averaged 3.14 % this week.

Economists at Fannie Mae predicted this week that 30-year rates could go as low as 2.9% in 2021, however it’s unclear yet what effect the COVID-19 pandemic will have over the long term.

“In our view, the negative shock will apply to both the home purchase and rental markets. On the demand side, early indications are that the purchasing benefit of lower interest rates are being offset by the downturn in employment,” says Doug Duncan, senior vice president and chief economist at Fannie Mae.

“On the supply side, the number of listings is falling, as those with homes to offer may either be hesitant to allow strangers to tour their home or worry that the lack of demand is placing downward pressure on the sales price they might otherwise receive,” Duncan adds.

© 2020 Florida Realtors®

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