Sluggish Housing Market Lowers Divorce Rate?

June 27, 2011

More married couples are deciding to stick together for the sake of home equity, a new study finds.

With a decline in home values nationwide, home owners are less likely to get a divorce, according to researchers. However, for married couples who rent, they are more apt to part ways.

For the basis of their findings, researchers combined 1991 to 2010 data from the Bureau of Census’s Current Population Survey with Federal Housing Finance Agency figures of home prices.

“Some of this evidence is consistent with home owners being locked into their homes—and hence marriages—by increased transactions costs in down markets,” researchers Martin Farnham, Lucie Schmidt and Purvi Sevak note in their study appearing in the American Economic Review.

The researchers note that if housing values have such an impact on the divorce rate then policy makers may have a difficult decision ahead. “Policies to speed the foreclosure process are seen as key to restoring certainty and therefore liquidity to the housing market. Yet such policies, by relieving housing lock-in, may then increase divorce rates among foreclosed-upon couples,” researchers note in the study, adding that could spur the growth of single parents and the “efficiency gains in the housing market may be offset by welfare losses in these other areas.”

Source: “Married to the Housing Bust,”The Wall Street Journal (June 25, 2011)