October 21, 2013

Will an Echo Bubble Ripple through America?

[For the official release, check out the complete survey and results]

The drastic improvement of the housing market has led to the term “echo bubble” being thrown around. Although experts are trying to predict the future of the housing market, there’s no surefire way to know exactly when, or if, there’s another housing bubble around the corner. However, one thing is certain: nearly half (48 percent) of Americans feel we’re headed for a second housing bubble within the next two years, according to the most recent COUNTRY Financial Security Index®.

Despite their pessimism, most Americans aren’t too worried about the housing market. Of those surveyed, 48 percent said another housing bubble is not one of their top worries. Perhaps the after-effects from the recent government shutdown are competing for people’s top concern.

Unattainable for the middle class?

Only 41 percent of Americans think owning a home is attainable for a middle-income family – down five points from last year. It’s possible people are responding to the rising home prices, which have soared by 12.4 percent* since last year.

People’s reasons for not owning a home vary. Check out the infographic below for some quick stats:


Why are Americans Expecting an Echo Bubble?            

Although most experts agree the increase in home prices is what the housing market needs to fully recover, here’s what may be making Americans hesitant:

  • Even though the momentum is slowing as winter approaches, home prices are still rising much faster than they have in the past five years.
  • Previous COUNTRY Financial Security Index surveys have shown Americans are becoming more and more pessimistic about the economy.

Preparing for Another Housing Bubble

Whether we see an echo bubble or not, there are things you can do to help ensure you’re not burdened with mortgage payments into retirement. Troy Frerichs, director of investments-wealth management at COUNTRY Financial, offers these tips:

  • Consider setting up a plan to pre-pay your mortgage – most mortgage companies don’t have pre-payment penalties (however, with interest rates at all-time lows, it might not make sense to do this, as mortgage payments are typically tax deductible and there is an opportunity cost associated with pre-paying a mortgage.)
  • Make sure you have a financial plan that takes your mortgage into consideration – every situation is different.

*According to the CoreLogic Home Price Index Report


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