The American Economic Review (AER) recently published a study which revealed a connection between divorce rates and the current home price decline across the nation. According to the study, the economy’s state is having a huge impact on social life. Home price declines could be affecting marital stability, but in a positive way.
Home Price Decline: A Big Factor in Decreasing Divorce Rates
Divorce rates have decreased over the past few years, the AER said. In 1996, 50 percent of all marriages ended in divorce, according to the US Census Bureau. In 2009, figures revealed a 46 percent divorce rate.
Numerous studies have been made on the impact of recession on almost everything. And studies seem to indicate that if it wasn’t for the decline in their home’s value, many couples would have been divorced by now.
The Great Recession and Marriage, a survey conducted by the University of Virginia’s National Marriage Project showed almost 40 percent of couples have put aside their plans to split before the recession started. So what is the reason behind this?
The AER said when jobs are readily available, credit accessible and homes are being priced for selling because of house price increase, divorce probability is high since couples can easily afford to move on with their lives. However, when jobs are scarce, credit difficult to gain and home prices on the decline, divorce probability is low since people become loss resistant. They don’t want to encounter the loss of a home in addition to the loss of a spouse.
The AER reported that even if it varies little due to gains, the decision to divorce could be strongly declining in losses. And this is what’s happening to many homeowners who are having problems with their mortgages.
In the US, housing prices have decreased steadily. There have been double digit declines in home prices in former boom markets such as Arizona and Florida. Plus the high cost of most divorce proceedings. So it becomes clear why couples have put aside their divorce plans. These factors should be taken into consideration when advancing new housing policy changes, the AER suggested.
A continuous stream of foreclosures is expected in the future as home prices continue to decline. So people are curious, “Will these trends continue to keep couples together?” According to the AER, their study points to that possibility.