(Bloomberg Prophets) — If we're all downsizing, who'supsizing?

That question should be critical to aging and retiring baby boomers whose main“asset” is the equity in their homes.

If current demographic trends remain in place — and there is nota shred of evidence that they won't — then we are facing ageneration of subdued home demand even as retirees will be looking tosell. We're not even considering the impact of what “normalized”interest rates means for mortgage borrowing.

This raises broader economic problems, too. Beyond the obvious,which is that retirees will face difficulty selling their biggestasset, household formation will remain sluggish. When newhouseholds are formed, they buy a lot of things, because along withhouses go new cars, appliances, furniture, maintenance, and toysfor the kids.

Related: The power and pitfalls of retirementsavers' illusions

Empty-nesters don't have those needs, and so they spend less.Less household formation means less consumption overall, which willprove problematic in an economy where consumption stands at arecord 69.4 percent of gross domestic product.

In other words, upward pressure on interest rates becomes moresubdued.

Given the frightening statistics on retirement savings,demographically induced stress on home values is the last thingretirees need. The Economic Policy Institute relays that the medianretirement savings is $5,000. The Government Accountability Officedid a study in 2015 that found the median retirement savings forthose aged 55 to 64 were $104,000 and for the 65-to-74 group it was$148,000. And that's the amount for those with some retirementsavings. The same study found 29 percent of those 55 and older hadnone.

You wouldn't know it from some of the recent housing data, butthe rate of homeownership in the U.S. has been dropping quitesharply. The decline should raise concerns when baby boomers startselling their homes since they are, by far, the group that ownshomes. The implication is that there will be a rising inventory ofhomes, specifically older and aging homes, for years to come.

That the U.S. population is aging is a fact. The median agetoday is 37.8 years. In 2000 it was 35.4 years and in 2026 it willbe 39.3 years, according to the Census Bureau. The 55-and-overcrowd makes up 34.7 percent of the total population, up from 27.4percent in 2000. They will grow to 36.4 percent in 2026 and to 38.9percent by 2026.

Here's the thing: As the population has aged, the homeownershiprate has been declining for just about everyone except for olderfolks. The rate stands at 63.4 percent for the overall population,down from a peak of 69 percent in 2004. However, the rate for olderAmericans has been relatively steady, and is sharply higher thanthat of their younger cohorts. Homeownership for the 65-and-olderset is highest at a whopping 78.8 percent, versus a peak of 81.1percent in 2012.

Contrast that with the 35-and-under set. This group's rate ofownership is 58.6 percent, down from its peak of 69.3 percent in2005.

And consider the 45-to-54 cohort, whose rate is 69.3 percentafter topping out at 77.2 percent in 2004. Bear in mind thesegroups are in their peak spending years both as individualsand as part of the larger economy in terms of consumption.

There is a bit of good news. The most recent data from theNational Association of Realtors shows that first-time homebuyersaccounted for 32 percent of all residential sales in February, anuptick from the cycle lows but still fairly meek. With stricterlending standards, high student debt and the demographics mentionedearlier, this upward trend is likely to remain rate muted.

But with the 55 and over folks having the highest rate ofhomeownership and their ranks having grown — and continuing to grow— relative to the population, who is going to be upsizing whenretirees are downsizing? The answer would seem to be far fewer thanthey or their realtors would like.

A recent study from the New York Federal Reserve took a closelook at these trends and concluded: “Why this secular decline isoccurring is unknown.” The study suggested that some reasons mightinclude declining real income for some households and“urbanization.” Both make sense. To those, I'll add in no specialorder:

• Debt-laden college graduates who will remain rentinglonger
• Smaller U.S. family sizes
• A preference by well-to-do youth to stay urban
• Shoddy homes and McMansions built in the last 25 years or sothat don't hold their value
• Millennials “postponing” traditional household formation

Equity in a home remains the most important asset for older U.S.households and, traditionally, has been a reliable investment tohelp supplement a comfortable retirement. The broader demographicshifts would argue that one's home no longer fits the bill. At theleast, its role is at risk of being severely diminished.

This column does not necessarily reflect the opinion of theeditorial board or Bloomberg LP and its owners.

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