The housing market has been touted as helping to drive the economic recovery, but Americans seem to feel that may be short-lived. According to the latest COUNTRY Financial Security Index® survey, nearly half (48 percent) say the country could be headed for another housing bubble in the next two years.
Despite this pessimistic prediction for the housing market, it’s not the top concern for many Americans.
- Forty-eight percent say that while they are concerned about the housing market, it is not one of their top national economic worries.
- One quarter say the housing market ranks among their top three concerns.
- Just 6 percent say it’s their top concern.
“Perhaps the government shutdown and debt ceiling are eclipsing just how concerned Americans are about the housing market right now, but with home prices up 12.4 percent* in the last year alone, concerns for an ‘echo bubble’ of the housing market collapse certainly make sense,” says Troy Frerichs, director of investments-wealth management at COUNTRY Financial. “That said, the best antidote to fear is knowledge, and as part of a savvy financial plan, it’s important to consider the level of investment and debt associated with any home purchase.”
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Barriers to Home Ownership
Perhaps the sharp increase in home prices is one reason why just 41 percent of Americans currently think owning a home is attainable for a typical middle-income family, down five points from last year. For those Americans who haven’t taken the home-purchase plunge, 26 percent say the lack of a down payment is the biggest obstacle, followed by concerns around job security and having too much debt (both 18 percent).
“The good news is that Americans are able to overcome many of these barriers to home ownership,” notes Frerichs. “By creating a smart financial plan and sticking to it, they can save up to pay down their debt and build their down payments, all while improving their credit scores and making themselves more attractive to mortgage lenders. The dream of owning your own home doesn’t have to be out of reach if you have a plan.”
Barriers by Generation
No matter their age, Americans face obstacles to buying a home – but the obstacle that tops the list for each generation is different. For Gen Y, as well as those nearing retirement (50 to 64 year olds), it’s the lack of a down payment (both 31 percent). Those ages 30 to 39 say it’s already having too much debt (24 percent), while 40 to 49 year olds are most likely to say job security concerns are the biggest barrier (29 percent).
Will You Retire Mortgage Free?
As for the 70 percent of Americans that do own a home, their focus is on mortgage payments. More than a quarter (27 percent) of homeowners do not expect to pay off their mortgage by the time they turn 65. The group closest to retirement age (50 to 64 year olds) is the most likely to say they will still be paying off their mortgage after 65 (37 percent).
“To help ensure you’re not burdened with mortgage payments into retirement, consider setting up a plan to pre-pay your mortgage as most mortgage companies don’t have pre-payment penalties. However, with interest rates at all-time lows, it may not make sense to do so as mortgage payments are typically tax deductible and there is an opportunity cost associated with pre-paying a mortgage. Every individual is different and a financial plan should take your mortgage into consideration,” adds Frerichs.
*According to the CoreLogic Home Price Index Report
The COUNTRY Financial Security Index®
Since 2007, the COUNTRY Financial Security Index has measured Americans’ sentiments of their personal financial security. The COUNTRY Index also delves deeper into individual personal finance topics to better inform Americans about the issues impacting their finances. Survey data, videos and analysis are available at www.countryfinancialsecurityblog.com and on Twitter at @FinanceSecure.
The COUNTRY Index was created by COUNTRY Financial and is compiled by Rasmussen Reports, LLC, an independent research firm, based on a national telephone and online survey of at least 3,000 Americans.
The margin of sampling error for a survey based on this many interviews is approximately +/- 2 percentage points with a 95 percent level of confidence.
COUNTRY Financial (www.countryfinancial.com) serves about one million households and businesses throughout the United States. It offers a full range of financial products and services from auto, home and life insurance to retirement planning services, investment management and annuities.