TALLAHASSEE -- Justin and Ashleigh Leto were ready to buy their Florida dream home. The property was perfect, the price was acceptable and the sellers were ready to hand over the keys to the first-time homebuyers.

One problem: insurance.

The home, a four-bedroom in Coconut Grove, had been deemed risky by all licensed private insurers, leaving state-run Citizens Property Insurance as the only company willing to cover it. Due to recent changes at Citizens, the quote for the annual insurance premium was far higher than anything the Letos had budgeted for. The deal nearly fell through.

“If I didn’t have friends who had warned me about the high cost of insurance, I would have been shell-shocked,” said Justin Leto, who closed on the house in June but still worries about the $11,000 annual insurance premium. “For a lot of people, this is going to make it impossible to buy a home.”

It’s a scenario playing out across the state, as rising insurance premiums play an increasing role in the home sales market, according to real estate agents and home builders.

State leaders and Citizens executives say increased rates are necessary to enhance the private insurance market and prevent massive “hurricane taxes” if a major storm wiped out Citizens’ cash surplus. Those hurricane taxes — levied on nearly all Floridians — would unleash untold harm on the economy, Citizens has warned in recent months.

But absent of such a storm, housing professionals say Citizens’ rate hikes are already hurting the real estate market, killing potential deals and spurring more foreclosures. The insurer’s flurry of policy changes — including ending coverage for new homes under construction and for some older homes — comes at a time when Florida’s housing market is showing modest signs of recovery from the steepest downturn in decades.

Danny Hertzberg, a Miami Beach real estate agent, said that in the last six months he has seen insurance costs emerge for the first time as a “big ticket item” with the potential to kill pending sales.

“It impacts the carrying costs. When you put that in addition to the property taxes, it can become unaffordable,” he said. “For people who want to sell and move, it’s one more barrier on selling. And you already have a group of people who are underwater and can’t sell.”

Carlos Lacasa, Citizens’ board chairman, said the insurer is “not tone-deaf” to the state’s housing problems, but has to take into account a number of competing interests, including political ones.

“We’re not a private company that can do whatever it pleases,” he said in an interview. “We are bound by what the law requires and what each member of the executive branch wants from us.”

Gov. Rick Scott has tasked the board with shrinking Citizens drastically, and swiftly.

Florida’s housing market was one of the hardest hit during the mortgage crisis and the state has some of the nation’s highest property insurance costs. Florida also has a higher percentage of delinquent mortgages than any other state.

More than one in five Florida homeowners are behind on their mortgage payments and nearly half of all mortgages are underwater — meaning more money is owed than the value of the property.