A recent study published by the
The findings indicate that the state of our economy may have further reaching social affects than many would assume. Home price declines could be positively affecting marital stability.
The AER study reports, "Our findings suggest that house prices have a significant effect on divorce shares." Divorce rates have declined over the past few years. The U.S. Census Bureau reported in 1996 that 50 percent of all marriages ended in divorce. Figures from 2009 showed a 46 percent divorce rate.
TIME Magazine weighed in on the study findings, saying, "Study after study has looked at the impact of the recession on everything from obesity to fashion ... a number of reports all year which, collectively, seem to indicate that the recession has made for estranged bedfellows of couples who would get divorced if it wasn't for the decline in their home's value. Almost 40 percent of couples who were considering a divorce or separation before the recession began said they put aside their plans to split, according to The Great Recession and Marriage, a survey conducted by the University of Virginia's National Marriage Project."
The AER used advanced mathematical formulas to account for variations in educational backgrounds and wealth levels and found that as home prices fall, divorce rates fall with them. What is causing this trend? The AER says, "When house prices rise, equity gains experienced by owners facilitate making down payments on separate homes and so could increase divorce probabilities." Basically, when jobs are easy to attain, credit readily accessible, and homes priced for selling, couples can afford to move on.
Conversely, when jobs are scarce, credit difficult to procure, and home prices on the decline, people become loss resistant. They don't want to face the loss of a home in addition to the loss of a spouse. "The decision to divorce -- which is often made simultaneously with the decision to sell one's home -- could be strongly declining in losses even if it varies little due to gains," reports the AER. This is especially true for the thousands of homeowners who are currently underwater on their mortgages.
Housing prices have declined steadily in all regions of the U.S. Former boom markets, such as Arizona and Florida, have seen double digit declines in home prices.
Add to this the high cost of most divorce proceedings and one reason becomes clear as to why couples have sidelined their splitting-up plans.
The AER suggests that these factors be taken into consideration when advancing new housing policy changes. "Given the high level of current interest in policy to shore up housing markets, it is worth better understanding the broader consequences of such policy."
The unemployment rate has edged back up in recent weeks. Home prices continue to decline and a continuous stream of foreclosures is expected for the foreseeable future. Will these trends continue to keep couples together? Recent evidence from the AER study points to this possibility.
Written by Carla Hill
July 15, 2011
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