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House prices and birth rates: The impact of the real estate market on the decision to have a baby

  • Dettling, Lisa J.
  • Kearney, Melissa S.
Registered author(s):

    This project investigates how changes in Metropolitan Statistical Area (MSA)-level house prices affect household fertility decisions. Recognizing that housing is a major cost associated with child rearing, and assuming that children are normal goods, we hypothesize that an increase in house prices will have a negative price effect on current period fertility. This applies to both potential first-time homeowners and current homeowners who might upgrade to a bigger house with the addition of a child. On the other hand, for current homeowners, an increase in MSA-level house prices will increase home equity, leading to a positive effect on birth rates. Our results suggest that indeed, short-term increases in house prices lead to a decline in births among non-owners and a net increase among owners. The estimates imply that a $10,000 increase leads to a 5% increase in fertility rates among owners and a 2.4% decrease among non-owners. At the mean U.S. home ownership rate, these estimates imply that the net effect of a $10,000 increase in house prices is a 0.8% increase in current period fertility rates. Given underlying differences in home ownership rates, the predicted net effect of house price changes varies across demographic groups. In addition, we find that changes in house prices exert a larger effect on current period birth rates than do changes in unemployment rates.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0047272713001904
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    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 110 (2014)
    Issue (Month): C ()
    Pages: 82-100

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    Handle: RePEc:eee:pubeco:v:110:y:2014:i:c:p:82-100
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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