Despite soaring mortgage rates, home prices continue to soar across the United States, making homes unaffordable for millions of Americans.

The spike in interest rates, which topped 7 per cent last year for the first time in 20 years, has created a "golden handcuffs" effect in the housing market: sellers who locked in record mortgage rates of 3 per cent or less during the start of the epidemic are reluctant to sell, opting for more expensive options instead, leaving few choices for eager potential buyers.

According to a recent Realtor.com report, the number of available homes on the market at the end of August was down more than 9 per cent from a year ago, and a staggering 45 per cent from the typical number before the epidemic began in early 2020.

But Barclays economists believe there is another factor driving home prices; the baby boomers. In a recent analyst report titled Blame the Boomers (Blame the Boomers), these strategists argued that the aging of the United States is spurring the formation of more households.

Strategists led by Jonathan Millar wrote: "Despite mortgage rates being at multi-decade highs, the US real estate sector is once again on an upward path, and while this is largely attributable to a shortage of existing properties and the lock-in effect of mortgages, we believe that strong demand is a symptom of an aging population."

This may seem a bit of a "contradiction" as an ageing population tends to need less housing. But that's not the case for baby boomers, who are currently between the ages of 57 and 75; baby boomers are reaching retirement age and forming new households as a result of divorce or death, but they're not freeing up existing supply.

Household formation drives demand for homeownership and rental. Formation refers to the change in the number of households living under the same roof each year. This usually happens when young people move out of their parents' home or when couples get divorced.

Miller said, "While it may be true that older people tend to prefer smaller housing units, it is not true that the older population needs fewer housing units."

According to the analysis, while there has been a "significant" increase in demand from the younger population, almost all of the additional demand can be attributed to an aging population and a significant increase in the number of households.

Barclays expects the imbalance between excessive demand from baby boomers and limited supply to continue for several years.

The analysts also said: "The data suggests that demographics are likely to underpin demand for the foreseeable future, in line with the number of new households of around 1.3 million per annum by 2020, while at the same time the cumulative shortfall of new housing units remains considerable, putting upward pressure on house prices and rents to promote more building. "