Housing Decision with Divorce Risk

Publikation: Working paperForskning


We build a realistically calibrated life-cycle model of housing decisions under divorce risk. As observed in the data, our model predicts the recent increase in divorce rates leads to reduced homeownership rates. The event of a divorce negatively affects homeownership, and this effect is long-lasting. The risk of a divorce triggers a precautionary savings motive. However, this motive is weaker when individuals can invest in owner-occupied homes because homeowners’ higher savings partially substitute for precautionary savings. When young, the larger asset accumulation due to divorce-risk induced precautionary savings enables households to buy homes earlier, whereas the presence of transaction costs leads to reduced homeownership for middle-aged and older households when divorce risk goes up.
UdgiverMunich Personal RePEc Archive
Antal sider46
StatusUdgivet - 14 nov. 2018
NavnMPRA Paper


  • Household finance
  • Real estate
  • Life cycle
  • Divorce risk
  • Family economics