No Minnesota community has been affected more by the nationwide flood insurance premium spike than the far northwestern city of Roseau, where the specter of rates that could add $400 to a monthly home payment has just about dried up the local housing market.

The real estate market should be booming in Roseau, a town of 2,600 whose leading employer, Polaris Industries, is hiring.

Nearly the entire community lies within the Roseau River flood plain — hard-hit by a major flood in 2002 — so mortgage lenders require purchasers to take out flood insurance. Last fall, people shopping for insurance and holders of policies coming up for renewal started getting premium quotes of $3,000 to $4,000 a year or more.

"The market's at a standstill," Roseau mortgage consultant Andy Jensen said.

In Roseau, 241 homes or businesses are facing steep premium increases, more than any other Minnesota city, according to data from the Federal Emergency Management Agency compiled by the Associated Press for more than 18,000 communities across America in the National Flood Insurance Program.

Thanks to local flood control projects, relief is in sight for Roseau and Crookston, another northwestern Minnesota city, where 137 policyholders are affected. But in the rest of the state, 3,468 home and business owners face hikes. Eventually, many will have to cover the full costs of their flood insurance.

Jake Ost and his wife, who are expecting their first child, found out quickly that they couldn't afford a home anywhere in Roseau's flood zone. They made an offer on a house they really liked, and then found out the flood insurance premiums could reach $4,000 annually.

But they were lucky, finding their dream home 3 miles outside of town on higher ground above the flood plain — a log house on a big lot where deer like to roam that's right on the Roseau River.

"Everything happens for a reason," Ost said.

Their real estate agent, Bob Brellenthin, said many families have been priced out of the market.

"I've had three deals blow up ... because we could not finalize the deal," he said.

Help from Washington

Roseau is pinning its hopes on two things. First is a change to the 2012 law that Congress approved and President Obama signed earlier this month. It would curb the increases, capping them at 18 percent annually for most homes.

More important is a flood diversion project due for completion in late 2015. Flood insurance requirements will be eliminated for nearly the entire city once FEMA certifies the finished work, said Todd Peterson, Roseau's community development coordinator. But that could take another year, he said.

Relief could come sooner for Crookston, a city of about 7,900 on the Red Lake River, which recently completed its levee system. Once FEMA signs off, only about a dozen homes will be subject to the higher rates, city building official Matt Johnson said.

But Crookston real estate agent Shirley Iverson said the high premiums came as a "total surprise" to a lot of longtime owners who want to sell now, she said.

Except for the premium phase-in, no relief is in sight for the southwestern city of Worthington, where 158 homes and businesses will see higher bills. A flood-control plan for the city of nearly 13,000 is still in the planning stages and could cost $5 million.

City Engineer Dwayne Haffield said about 10 percent of its homes sit in a shallow depression that doesn't drain well, so they're at risk of basement flooding from heavy rain.