House Prices and Birth Rates: The Impact of the Real Estate Market on the Decision to Have a Baby

Abstract

and Harvard University for helpful comments on this project. The manuscript has also benefited from the suggestions of anonymous referees. The analysis and conclusions set forth are those of the authors and do not indicate concurrence with other members of the research staff, the Board of Governors, or the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.© 2011 by Lisa J. Dettling and Melissa Schettini Kearney. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. ABSTRACTThis project investigates how changes in Metropolitan Statistical Area (MSA)-level housing 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 MSAlevel 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 percent increase in fertility rates among owners and a 2.4 percent decrease among nonowners. 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 percent 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. This project investigates how changes in Metropolitan Statistical Area (MSA)-level housing 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 inc...

The asymmetric housing wealth effect on childbirth

“…Namely, the e¤ect of a decrease in home value is not statistically di¤erent from 0. This indicates that fertility decisions are less likely to response to housing market variation during the period of house price declines, perhaps an increase in housing wealth may lead households move up their period of childbearing to a greater extent than a decrease in housing wealth may lead households to delay, as suggested by Dettling and Kearney (2013). On the other hand, Dettling and Kearney (2013) The …rst contribution of this paper is used data from housing bust period in more detail to examine the impact of the depressed housing price on childbirth.…”

“…This indicates that fertility decisions are less likely to response to housing market variation during the period of house price declines, perhaps an increase in housing wealth may lead households move up their period of childbearing to a greater extent than a decrease in housing wealth may lead households to delay, as suggested by Dettling and Kearney (2013). On the other hand, Dettling and Kearney (2013) The …rst contribution of this paper is used data from housing bust period in more detail to examine the impact of the depressed housing price on childbirth. Lovenheim and Mumford (2013) suggested that more work examining the e¤ect of the housing bust on fertility is needed in the future when data from the period of the housing bust become available.…”

“…The purpose of this paper is to empirically examine to this question, using the recent survey data of Japanese households. Dettling and Kearney (2013) and Lovenheim and Mumford (2013) suggested that increases in housing prices tend to have a negative substitution e¤ect on the demand for children when the association between children and housing are complements. This could be true especially for prospective homeowners who would buy a house with the addition of a child.…”

“…Among renters, however, the Metropolitan Statistical Area (MSA)-level housing price grows have no signi…cant e¤ect on the current fertilely. Dettling and Kearney (2013) estimates demonstrated short-term increases in house prices lead to a decline in births where a non-owners rate is relatively high. This drop, however, is outweighed by an increase in births where an ownershup rate is relatevely high.…”

Did the Great Recession affect sex ratios at birth for groups with a son preference?

“…Studies find that the Great Recession decreased the US fertility rate by reducing the value of wealth or income (Dettling and Kearney, 2014;Lovenheim and Mumford, 2013;Schneider, 2015). This paper contributes to this literature by examining the extent to which the Great Recession had a gender-differential impact on fertility, particularly for the ethnic minorities in the US with a son preference.…”