Move over baby boomers. By 2019, millennials will become the largest generation in the United States at 75 million strong. And guess what? They’re ditching studio apartments and taking the housing market by storm.

You know the oft-told story: Millennials — born between 1981 and 1996 — are saddled with debt, the financial crisis left them dubious of Wall Street, they’re being paid historically low wages, they live in their parents’ basement. But these somber anecdotes don’t tell the whole story. It may come as a surprise to some, but millennials are a driving force behind the current housing boom in the U.S.

First-time homebuyers accounted for 46 percent of new mortgages backed by Freddie Mac in the first quarter of 2018, which is the largest share held by newbies since 2012 (when they started tracking these trends). The average age of first-timers: 32, according to the National Association of Realtors. The influx of millennial buyers is helping to fuel a housing market that’s growing increasingly competitive and pricey.

“This is a millennial-driven rise,” Sam Khater, chief economist at Freddie Mac, told Bloomberg. “You’ve got a strong economy that’s helping, along with the appetite of the financial market to invest in mortgages.”

First-time buyers are entering a red-hot housing market. First off, the economy appears to be strong, and inflation indicators are modestly ticking upward. As a result, the Federal Reserve has raised its key interest rate several times since the financial crisis, with more hikes expected within the next year or so. When the Fed raises its key rate, interest rates for mortgages typically rise shortly thereafter. The interest rate on a 30-year, fixed-rate mortgage is hovering around 4.6 percent — it was 3.78 percent in September. It’s the highest mortgage rates have been in seven years.

That increase from September is enough to boost the monthly payment on a $200,000 mortgage by $85, give or take. House-hunters, concerned about the rising cost of their mortgages, may be jumping into the market in the hopes of locking in (historically) low rates before the window closes. That means there are a lot of buyers competing for a finite number of homes.

With the robust demand, home prices jumped 6.9 percent year-over-year in April; nearly half of the nation’s 50 largest housing markets are now considered overvalued, according to CoreLogic, a provider of consumer and financial data. CoreLogic determines affordability by “comparing home prices to their long-run, sustainable levels”, and a home is considered overvalued if prices rise at least 10 percent above this long-term, sustainable rate.

Supply is also thin. While homebuilders are indeed increasing their output, most of their efforts are focused on mid-level or luxury homes, not entry-level homes that appeal to first-time buyers.

TAKE THE NEXT STEPS

Even though home prices and interest rates are rising, it’s good to have a little perspective. Mortgage rates are well below 5 percent; in 1981, when the first millennials were entering the world, mortgage rates exceeded 18 percent at one point. Still, today’s market is competitive, but there are plenty of ways to ensure your home hunt is successful. It’s a tired, old adage, but it rings especially true if you plan purchase your first home in 2018: A little preparation will go a long way.

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