It may seem paradoxical, acknowledged Barclays senior economist Jonathan Millar in a Thursday research report. After all, many would assume that an aging population would require fewer homes, but that's actually not the case, he noted.
Baby boomers are actually creating more households, putting pressure on housing demand and keeping prices aloft despite the highest mortgage rates in more than 20 years. Boomers are creating more households partly because they're separating due to divorce or death, Millar noted.
What is "household formation"? The formation of households is one of the engines that drives the housing market. It occurs when a person who has been living in a home with other people moves out on their own, becoming the head of a new household. That often happens when young adults move out of their parents' home or into their first apartments after college, and the data shows that there's a jump in household formation at age 25. But the trend then gradually rises until it peaks around retirement age and older, Millar noted.
"Among other things, this reflects the parenthood phase during prime age (25-54), the separation of adult children from the household, divorce and the heightened possibility of eventually losing a life partner to death," he wrote.