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Economics of Divorce - Part II

Updated: Apr 12

What Economic Conditions Lead to a Higher Divorce Rate?

People will divorce regardless of the high cost. Some marriages are not worth saving. But economic conditions do have an affect on the divorce rate. It might be surprising that divorce is more likely as the economy improves. People feeling stress due to economic insecurity may be miserable, but they are less likely to divorce.

This may seem counterintuitive, but the reality of the economics of divorce means that people considering divorce, including people who should divorce, will stay together because poor economic conditions make divorce more difficult. It is particularly hard on women - as divorce rates drop faster when women’s unemployment rises.

A big issue is that the family home is generally the biggest asset in a marriage. Equity in that home can affect the decision to divorce. More equity means people are more likely to divorce. Statistics show that areas that have increased economic growth have higher divorce rates. People are less likely to divorce in a down housing market.

One area of economic stress that does lead to divorce is losing the family home. Besides the stress involved in losing the home, the main asset is lost and there is no money to lose selling the house.

One other issue is that the cost of an attorney is so expensive. Most people cannot afford the $5000 to $10,000 it costs to get a divorce started. It is easier to justify borrowing the money if you know you will receive money in the end from the sale of the family home. Attorneys will take cases with less money down if they know that there will be money to distribute when the house is eventually sold.

Regardless of the cost of the attorney, people should consider the overall cost before deciding to divorce. Even if you will receive money from the sale of a house, you will be forced to sell your biggest and best investment. It is difficult for most couples to buy new homes after a divorce given the high cost of real estate in California. It is not uncommon for people who get a divorce to never buy real estate again.

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