This study investigates the mechanisms influencing China’s real estate market in the context of a diminishing demographic dividend and an aging population. Utilizing the life cycle hypothesis, we develop an overlapping generations model incorporating housing demand and analyze provincial panel data from 2000 to 2021. Employing the panel data instrumental variable approach, our analysis reveals that labor mobility driven by urbanization significantly elevates housing prices. Additionally, after using raising costs as an instrumental variable to control for the endogeneity of demographic structure, population aging negatively impacts housing prices, while urbanization positively impacts housing prices. Robustness tests indicate that these effects are more pronounced in the eastern region compared to other areas. Furthermore, our spatial panel data model shows significant cross-regional spillover effects on housing prices.