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October 24, 2011

2

The Birds and the Bees and Everything Real Estate

by mark mclean

I picked up this article from the good folks at Freakonomics. Love the name, love the content.

A new research paper by Lisa Dettling and Melissa Schettini Kearney from the University of Maryland examines whether the fluctuation in home prices affects fertility rates. The authors used Vital Statistics data from 1990 – 2007, and Federal Housing Finance Agency Price Index (and alternately the Case-Shiller Index) to simulate equity/fertility correlations.

From their research; Our estimates suggest that a 10 percent increase in house prices would lead to a 4 percent increase in births among home owners, and a roughly one percent decrease among non-owners.

The authors refer to this as the “home equity effect.” These are pretty big numbers, and all the more interesting since the fertility increase for home owners is so much higher than the decrease for non-owners.  The study further breaks down the numbers for different ethnic groups: The authors simulate that a 10 percent increase in MSA-level house prices leads to a 2 percent increase in current year births among whites, a 0.5 percent increase in births among blacks, and a 1.7 percent increase in births among white Hispanics.

The authors acknowledge that fertility is a many-layered and complicated decision, not based solely on something as simple as a real estate listing. A house, however, is often the most collateral that a woman or couple has to offer towards a more expensive future that includes diapers and school supplies. The paper is based on pre-2008 data, so it doesn’t totally capture the fallout in the housing market, or the economy. While birth rates dropped 2 % in 2008 from their 50-year high set in 2007, the Case-Shiller price index fell 18% in 2008. With the housing market likely to remain weak over the next few years, it would appear to be a buyer’s market, but not a baby’s.

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2 Comments Post a comment
  1. Nov 12 2011

    I really hope the market rebounds soon Your site is great and I come here quite a bit I do not usually leave comments I will add your site on my twitter page. Question: if you had a RSS feed? I couldn’t find it. I would like to put it in my reader.

    Reply
  2. Jake
    Dec 5 2011

    Funny personal story. I lived on a street called Bertmount for a few years. From the time I moved in as a single guy with two roommates, my neighbours started to all get pregnant or have recently had babies. They wanted to rename the street Birthmount!

    (then I moved and had a baby of my own… married this time though 😉 )

    Reply

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