Baird Fixed Income Insights: Convexity Pulse
Oct 19, 2026 · 24 min · 10 segments
In this week’s Convexity Pulse, the very real, decidedly non-imaginary Steven Scheerer rejoins Kirill Krylov so they can discuss how changing demographics and emerging mortgage structures could…
Kirill KrylovHost
Steven ScheererHost
Now, we have spent, you and I have spent better part of the last decade talking about the US and how it does not have enough housing.
Millennials are forming new household, builders cannot keep up and housing scarcity is treated almost as a permanent feature of this economy.
Yet our latest research, which, by the way, to be fair, based on data released by Harvard, that research suggests that the demographic foundation of our argument is beginning to, well, shift.
Well, I think what was the most interesting was the magnitude of their projected slowdown.
Harvard expects household growth to average about 859,000 annually over the next decade.
And in the following decade, between 2035 and 2045, the projection falls to just 510,000 a year.
Importantly, they're still expecting new households to be forming, but looking forward, there will be an increasing number of older households disappearing.
By the late 2030s, Harvard expects roughly 2.3 million younger households to form on an annual basis and about 1.9 million older households to dissolve.
But on that note, this is where actually baby boomers really do enter the story, right? We have spent years discussing them as homeowners who refuse to sell because they are sitting on 3% mortgages.
The oldest boomers are now turning 80 or almost 80 and households headed by people over 80 are projected to approximately double over the next 20 years.
Eventually, retirement, health considerations, assisted living, or simply moving closer to family will begin to override those mortgage economics.
Stephen? Well, we need to distinguish between a house becoming available and a house becoming useful supply.
An inherited property in, say, rural Pennsylvania doesn't directly solve a housing shortage in Boston.
Now, we have spent, you and I have spent better part of the last decade talking about the US and how it does not have enough housing.
Millennials are forming new household, builders cannot keep up and housing scarcity is treated almost as a permanent feature of this economy.
Yet our latest research, which, by the way, to be fair, based on data released by Harvard, that research suggests that the demographic foundation of our argument is beginning to, well, shift.
Well, I think what was the most interesting was the magnitude of their projected slowdown.
Harvard expects household growth to average about 859,000 annually over the next decade.
And in the following decade, between 2035 and 2045, the projection falls to just 510,000 a year.
Importantly, they're still expecting new households to be forming, but looking forward, there will be an increasing number of older households disappearing.
By the late 2030s, Harvard expects roughly 2.3 million younger households to form on an annual basis and about 1.9 million older households to dissolve.
But on that note, this is where actually baby boomers really do enter the story, right? We have spent years discussing them as homeowners who refuse to sell because they are sitting on 3% mortgages.
The oldest boomers are now turning 80 or almost 80 and households headed by people over 80 are projected to approximately double over the next 20 years.
Eventually, retirement, health considerations, assisted living, or simply moving closer to family will begin to override those mortgage economics.
Stephen? Well, we need to distinguish between a house becoming available and a house becoming useful supply.
An inherited property in, say, rural Pennsylvania doesn't directly solve a housing shortage in Boston.
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