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18 | M R EP O RT FEATURE A s some observers of the U.S. economy like to note, there are a variety of indica- tors suggesting that our nation's long-running economic expansion could be losing steam—and sooner or later, it surely will. Planning for this eventuality is of the utmost importance for every business, but it's also worth keeping in mind the strong place we are in cur- rently, relative to other moments in our history. The U.S. is officially in its longest expansion ever, having broken our historic record of 120 straight months of economic growth over the summer. Consumer spending has been strong, while stocks flirted regularly with record highs most of the summer and into early fall. We also have the lowest unemployment rate in 50 years. In September 2019, the Labor Department informed us that unemployment, clocking in at 3.5 percent, had effectively achieved the lowest rate since 1969. These strengths have, in turn, driven strong performance in the housing market—a cornerstone of the U.S. economy. According to the Radian Home Price Index, stronger year-over-year home price appreciation was driven by lower interest rates, lack of supply, and a solid economy. Year-over- year gains in appreciation had slowed throughout much of 2018 and the first months of 2019, but the Index tells a different story now. All indications are that low interest rates in particular have reheated an already hot real estate market. Additionally, U.S. Census data tells us that the homeownership rate continues to steadily increase since its recent low in 2016, and reached its four-year high in 2018 at 64.8% before more recently leveling off to 64.1% in Q2. Since first-time homebuyers—most of whom are between the ages of 24 and 35—constitute about 33% of total residential home sales, their experience is integral to under- standing the current state of the housing market. Today's First-Time Homebuyers F or many years, millennials have been the subject of a lot of attention within the housing industry, especially as they began to reach homebuying age. During that time, the market has been well educated about how to best serve millennials, a group that now makes up fully one third of the homebuying market accord- ing to the National Association of Realtors. Millennials will remain a central force in the housing market for decades to come, but Gen Z—a group that has gotten significantly less attention thus far—is now also beginning to enter the homebuying market in force. Born between 1995 and 2010, Gen Z will be the largest U.S. demographic group by 2026, constituting approximately 82 million U.S. consumers. Thus far, surveys suggest that Gen Z is a highly practical, optimistic genera- tion, focused early on avoiding the crushing student debt of their elders by saving money through gainful employment, financial gifts, or careful consideration of public versus private college and e-learning options. Whereas millennials lived the austerity of the Great Recession, for Gen Z, economic hardships are something their parents told them about and that they quietly take measures to avert. Millennials and Gen Z are looked upon as being wholly fluent in technology, but Gen Z never knew a world without it and has evolved to incorporate technology into virtually every aspect of their lives. While starting off life with a more conservative approach to borrowing than previous genera- tions, perhaps it is Gen Z's inherent optimism that inspires its dream of homeownership. Indeed, a recent survey conducted by Homes.com reported that 87% of Gen Z mem- bers report they want to own their own homes before age 35, the age of the average first-time homebuyer, according to Fannie Mae. Based on today's positive market conditions, Gen Z's home- ownership plans seem reasonable and achievable. And yet, while record numbers of workers across generations are currently gain- fully employed and consumer sentiment is strong, the dream of owning a home can still be frustratingly out of reach. As Gen Z is wisely alert to, student loan debt remains a sig- nificant burden. Across all genera- tions, student loan debt reached $1.7 trillion or $35,359 per capita on average in 2019. According to AARP's Three Generations Survey conducted in late 2018, 36% of millennials say the burden of student debt has prevented them from buying a house, while 25% admit it has prevented them from moving from their current homes. For baby boomers, those figures work out to 32% and 18% respec- tively; for Gen X, 26% and 21%. With 48% of Millennials, 26% of Gen X, and 12% of baby boom- ers burdened by student loan debt, saving for a down payment and home price affordability are paramount concerns for first- time buyers. Unfortunately, with rising land prices and localized regulatory constraints, many cities are experiencing a shortage of moderately priced starter homes. According to the Harvard Joint Center for Housing Studies' 2019 State of the Nation's Housing, the increased costs associated with producing new homes have forced builders to focus on developing a higher-end product with better The Keys to Growth With the U.S. economy nearing the end of a historic expansion, here's why first-time homebuyers are critical. By Rick Thornberry