Bloomberg News had an interesting article recently highlighting that one of the prime movers of high housing prices in Hong Kong is…divorce. It seems that the sudden increase in divorce leads to increased demand for homes, a scarcity in densely populated Hong Kong. As a result, home prices have gone up as has new home production.
Has the same happened in the United States?
We have noticed some interesting historical trends. In any divorce, the couple either has the financial means to establish two equivalent households or one or both spouses must downsize. The former situation means a higher demand for single family homes; the latter means an increased demand for condos and rental units.
If you look at St. Louis and the metropolitan areas surrounding the city, as divorce rates increased from the 70’s onward, the housing market did change. First, people continued to move west – first into St. Louis County, then far west St. Louis County, and ultimately into adjacent counties like St. Charles and Jefferson counties. Why? Because at that time these areas had been undeveloped, land could be had for less, and one could build much more home for the money. We believe divorce did contribute to some of that movement.
Also, in this same time period, more affordable housing began to spring up – especially condominiums, which suited two classes of people: those approaching retirement and those newly single. Additionally, apartment complexes went up, as did their rents.
Now that St. Louis and its counties have less room to build, housing prices will probably increase in part due to the demand for movement created by divorce.
As parties consider divorce and new households, selling the marital residence may make a great deal of sense in the present market. It is definitely a seller’s market, and houses are moving quickly at above asking price. Smart former spouses could benefit by taking the surplus equity on the sale and investing in a smaller residence.
Important caveats: as always, newly divorced individuals should budget accordingly – only buy the amount of house you need and can afford. Also, if you have children, think about their needs to stay in close proximity to the residence of the other spouse, both for school purposes and to minimize transportation time and expense.
Final caveat: divorce is not the answer to creating a housing boom!
If you have questions about housing and divorce, contact us – we can help.