Sunday, August 12, 2007

Buy Low, Divorce High?

I realize that this may make great sense--especially for a spouse without an income--but this article in the New York Times about people timing their divorce around the real estate market was vaguely disturbing:

A little-noted side effect of the property boom of the past decade has been the real-estate-enabled divorce. Home values might have slid in some markets, but in the New York City region, where prices remain high, divorce professionals like therapists and lawyers, along with real estate brokers, say unhappily married couples are cashing in appreciated homes to underwrite a split.

“The equity that there is in real estate is one of the impetuses why there are so many divorces,” said Nancy Chemtob, a Manhattan divorce lawyer, adding that the net worth of her clients has doubled in the past three years mainly thanks to real estate. The price of the average Manhattan apartment was $1.3 million as of June, up 7 percent from a year ago, according to the real estate brokers Brown Harris Stevens.

A spouse who has not worked, like Ms. Kleier’s client, might decide that with a divorce settlement enriched by real estate, it is possible to maintain a comfortable standard of living. Or a breadwinning spouse might recognize that even after dividing community property, it will be possible to live well as a single person.


. . .

Economists are familiar with this phenomenon. Even though divorce rates are declining over all, as far back as 1977 the economist Gary Becker showed that couples experiencing any unexpected, drastic rise in net worth are at risk of divorce. (The same holds true for a drastic decline in net worth.)

Extrapolating from survey data, Dr. Becker concluded in The Journal of Political Economy that “a greater deviation between actual and expected earnings increases the probability” of divorce.

Although couples who see their incomes rise steadily generally stay together, those who make more money than they ever expected are vulnerable to divorce. They realize that they are less financially dependent on each other and that they might have chosen different spouses if they had more choices at the time, said Dr. Becker, who teaches at the University of Chicago.

Dr. Becker, who won the Nobel Prize in 1992, also explored in his divorce study the economic argument for what many people today call trading up, or finding a trophy spouse.

Noting that 75 percent of men and more than 70 percent of women remarry within 15 years of a divorce, he found that divorced men with higher earnings have the greatest likelihood of remarrying. This implied, in his view, that men who have come into wealth have an incentive to divorce because they believe they could better their situation.


Read it all here.

So why is this troubling? It suggests more attention to the economics of divorce than on trying to resolve the reasons for the marital trouble in the first place.

No comments: