Thanks for the question. I haven't personally read or heard that demons dwell on the sea or water. I don't think that could be justified from the Bible. Certainly the angelic realm, and in particular the fallen angelic realm, is associated with the air and/or heavenly places. For example:
Eph 2:2 in which you formerly walked according to the course of this world, according to the prince of the power of the air, of the spirit that is now working in the sons of disobedience.
Eph 6:12 For our struggle is not against flesh and blood, but against the rulers, against the powers, against the world forces of this darkness, against the spiritual forces of wickedness in the heavenly places.
An interesting thing about demons/evil spirits is that they seek to possess a body. Jesus taught:
Mat 12:43-45 When an evil spirit comes out of a man, it goes through arid places seeking rest and does not find it. (44) Then it says, 'I will return to the house I left.' When it arrives, it finds the house unoccupied, swept clean and put in order. (45) Then it goes and takes with it seven other spirits more wicked than itself, and they go in and live there. And the final condition of that man is worse than the first. That is how it will be with this wicked generation."
You see the same desire in the passage you mentioned where the demons that were cast out desired to go into another body - in this case the pigs... who reacted to being possessed by running in panic and drowning themselves in the lake.
So where do demons come from?
As to where demons come from that is hard to answer because the Bible doesn't specifically say. Many assume that they are simply fallen angels, or a lower class of fallen angel, that rebelled along with Satan at His fall (Rev 12:4,9 Matt 25:41).
That could be right but I don't think that you can conclusively say that demons and fallen angels are exactly the same as the Bible doesn't say so. While not scripture, the extra-Biblical 'Book of Enoch' has some interesting things to say about the origin of demons/evil spirits. While I don't see this as God's word, it is interesting that the book of Jude quotes from the book of Enoch in Jude 1:14... so at the very least it makes the book worth considering. Early church fathers such as Iranaeus, Clement, Origen, Justin Martyr and Tertullian all reference the book of Enoch. Dr Wuest writes concerning this verse in Jude:
"The quotation is from the apocryphal Book of Enoch. This book, known to the Church Fathers of the second century, lost for some centuries with the exception of a few fragments, was found in its entirety in a copy of the Ethiopic Bible in 1773 by Bruce. It consists of revelations purporting to have been given to Enoch and Noah. Its object is to vindicate the ways of divine providence, to set forth the retribution reserved for sinners, and so show that the world is under the immediate government of God."
In the book of Enoch, chapter 15 it says this concerning the origins of demons/evil spirits:
15.2 And go say to the Watchers of Heaven, who sent you to petition on their behalf: You ought to petition on behalf of men, not men on behalf of you.
15.3 Why have you left the High, Holy and Eternal Heaven, and lain with women, and become unclean with the daughters of men, and taken wives for yourselves, and done as the sons of the earth, and begotten giant sons?
15.4 And you were spiritual, Holy, living an eternal life, but you became unclean upon the women, and begot children through the blood of flesh,and lusted after the blood of men, and produced flesh and blood, as they do, who die and are destroyed.
15.5 And for this reason I give men wives; so that they might sow seed in them, and so that children might be born by them, so that deeds might be done on the Earth.
15.6 But you, formerly, were spiritual, living an eternal, immortal life, for all the generations of the world.
15.7 For this reason I did not arrange wives for you; because the dwelling of the spiritual ones is in Heaven.
15.8 And now, the giants who were born from body and flesh will be called Evil Spirits on the Earth, and on the Earth will be their dwelling.
15.9 And evil spirits came out from their flesh, because from above they were created, from the Holy Watchers was their origin and first foundation. Evil spirits they will be on Earth and ‘Spirits of the Evil Ones’ they will be called.
So to sum this up, the book of Enoch teaches that some fallen angels, called "Watchers' took human wives and produced giants upon the earth. Genesis 6 calls these giants 'Nephilim' (literally 'fallen ones, giants'):
Gen 6:1-4 Now it came about, when men began to multiply on the face of the land, and daughters were born to them, (2) that the sons of God saw that the daughters of men were beautiful; and they took wives for themselves, whomever they chose. (3) Then the LORD said, "My Spirit shall not strive with man forever, because he also is flesh; nevertheless his days shall be one hundred and twenty years." (4) The Nephilim were on the earth in those days, and also afterward, when the sons of God came in to the daughters of men, and they bore children to them. Those were the mighty men who were of old, men of renown.
The Nephilim are considered by many as giant demigods, the unnatural offspring of "the daughters of men" (mortal women) in cohabitation with "the sons of God" (angels). This utterly unnatural union, violating God's created orders of being, was such a shocking abnormality as to necessitate the worldwide judgment of the Flood.
Merrill F Unger
The fallen angels / watchers that did this in the days of Enoch and Noah were said to have been placed in everlasting chains awaiting judgment:
Jud 1:6-7 And angels who did not keep their own domain, but abandoned their proper abode, He has kept in eternal bonds under darkness for the judgment of the great day, (7) just as Sodom and Gomorrah and the cities around them, since they in the same way as these indulged in gross immorality and went after strange flesh, are exhibited as an example in undergoing the punishment of eternal fire.
See also 2 Peter 2:4-5. Now the Nephilim perished in the flood (though Genesis 6:4 also tells us that this occurred 'afterward' as well. Hence the giants who were around when Israel came to the Promised Land - Num 13:33, 2Sa 21:16.) So what happened to the spirits of the Nephilim if their bodies perished in the flood? According to the book of Enoch these spirits, the offspring of the 'watchers' who mated with human woman, became the evil spirits with the earth as their home. It could well be that this is why evil spirits/demons seem to desire a body to possess for this was their origin. This origin of demons was actually a common Jewish belief and there are passages in the Dead sea scrolls, as well as the early church fathers as mentioned, that teach this as well.
To conclude, I 'lean' this way -
- That 'the Devil and his angels' are the angels who originally rebelled at the time of Satan's fall.
- Within that group, some seem to have 'left their domain' and 'went after strange flesh' (Jude's reference is to the homosexual acts of Sodom but they were used as an example to back up how these angels also went after 'strange flesh' which in their case was human women). They have been bound for this particular wickedness, while the other fallen angels, along with Satan, are still unchained and still cause a lot of grief around the world.
- The offspring of those 'watchers' who left their domain, called the Nephilim, were destroyed in the flood, but their spirits, became the 'evil spirits' upon the earth.
That is where I lean concerning the origin of demons. I'm not trying to be dogmatic about it because the Bible itself doesn't reveal the details. And if it was important for us to know then the Bible would be clear on it. But it isn't. So we can hold to a particular thought but I wouldn't major on this one or be overly dogmatic on it. There are many mysteries, including Satan's own fall and where his iniquity came from, that the Bible doesn't go into in great detail... but one day soon we will understand all these mysteries!
Hope this helps. God Bless,