Do Home Prices Affect the Birds and the Bees?

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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 the abstract:

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 percent in 2008 from their 50-year high set in 2007, the Case-Shiller price index fell 18 percent 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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  1. Dragline says:

    This sounds like hopeless confusion between correlation and causation. It’s been well known that people tend to have more babies when economic times are good. That would also cause home prices to rise. It’s a basic a logical fallacy to say that one effect causes the other effect.

    A causes B and A causes C, does not mean that B causes C. It’s as simple as that. Why do we give this kind of thinking any credit?

    • Eric M. Jones. says:


      I’m with you. The increase in the sales of canned peaches correlates with college dropouts….yawn….

      Correlation is just not something to worry about. There is a sense that some greater truth will be revealed if one can figure out how two things are connected, but once you see the trick, the fun’s all over.

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    • Enter your name... says:

      Whether people have more babies when the economy is up depends on your location. In some European countries, a weak economy produces an increase in babies. The thinking seems to be that I’ve lost my job, so I’m staying home anyway, so maybe this is a good time for us to have a baby (and get government child support money rather than unemployment checks, and have everyone coo over the baby rather than ask me how my job search is going).

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    • nobody.really says:


      Ok, so how can we reconcile this trend with the observation that fertility goes DOWN among non-home-owners? Do non-home-owners live in a different economy than home-owners?

      Perhaps so. That is, if a strong economy drives up real estate prices, costs for both buyers and renters increase. But buyers have the consolation of getting a more valuable capital asset; renters don’t. Thus, it’s unclear that the benefits of a strong economy will offset the burdens of the increased rents that renters pay. And conversely, as the economy softens and real estate prices fall, renters may derive a benefit from lower rents that partially offsets the harm of lower earnings; home owners don’t.

      The current recession, however, may be atypical because it was driven by a real estate boom and bust. Many former home owners have now become renters, increasing demand for rental units. But the formerly owned homes are tied up in legal proceedings and are not yet available to rent. Because the supply has not expanded with the demand, I expect in many places that the challenges of a depressed economy have not been offset by a drop in rental prices. In short, I’d expect fertility rates to decline among home-owners and non-home-owners alike.

      Finally, I note the Freakonomics guys said,


      I acknowledge that home-ownership is a marker for many kinds of distinctions: social class, education, employment, etc. But, except for the (rather weak) dynamics noted above, I can’t figure out how these distinctions would cause fertility rates among non-home-owners to move in a reciprocal fashion to the fertility rates of home owners. The fact of the reciprocity, not the magnitude, is what surprises me.

  2. dumdum says:

    How is birth rate a measure of fertility? Somebody please explain this to me…

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    • Enter your name... says:

      Birth rate *is* fertility within this field. “Fertility” in economics means “had a baby”, not “theoretically has the biological capability to have a baby” (the medical definition).

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      • G.E. Hoostal says:

        The use of contraception & birth control comes in between these two things; and I believe that accounting for its detrimental effect on the birth-rate would probably be very difficult because of the complexity of factors, e.g. hormonal birth-control preventing embryonic implantation, which we know occurs but cannot count the incidence of, such a pregnancy being generally undetected. Thus, fertility and birth-rate, not being truly synonyms, may (?) be used as such in economics as merely a convenience.

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  3. Dave says:

    There’s a major obvious confounder here…. the economy.

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  4. Melissa Kearney says:

    Dear Dragline,

    I appreciate your concern about correlation and causation. My coauthor and I work very hard to detangle correlation from causation, and identification is at the heart of our empirical strategy. As to the specific point about “people tend to have more babies when economic times are good”, we believe one of the contributions of this paper is to point out that at least part of the documented relationship between economic measures such as the unemployment rate and birth rates is actually due to the effect of the real estate market, which has not been previously considered.


  5. Bridget says:

    Sometimes people decide to move to a bigger house before having kids because they need the extra space, extra bedroom, etc. If you’re currently in something like a tiny 1 bedroom house, and you’re not confident at all that it will sell if you need to move, you might wait things out a little longer. Was there any research into these kinds of details?

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  6. Lisa Dettling says:

    Dear Dragline,

    First, this is an interesting correlation. Thanks for pointing this out. But it is almost surely just a correlation, and in fact, our results suggest the omitted variable of house prices might be a good explanation for why this relationship exists. Note that very few individuals have a large share of their wealth in the stock market, especially those of childbearing age.

    Second, stock market movements are experienced across MSAs equally. If the stock market is up or down in a given year, this is controlled for in our empirical analysis with the inclusion of year effects. Our estimates are identified off short-term changes in house prices at the MSA-level, controlling for MSA fixed effects, MSA time trends, year effects, and other time-varying MSA conditions, such as unemployment rates and income levels. I invite you to check out the paper!


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  7. Average Mother says:

    As a lower middle class mother I can totally see how owning a home affects a person’s decision to have a baby. I know people who have waited and waited until they are in just the right economic situation and now it might be too late biologically. It can be financially stressful enough to provide for yourself let alone a child for eighteen+ years. Being a homeowner seriously alleviates the uncertainty of the future and when you have kids there can be a lot of uncertainty. Basically all I am saying is that the thesis of the article makes sense intuitively.

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    • Tyler says:

      The article may be on to something.. When people have more wealth they may feel they have the resources to raise children. So when the price of housing rises the owners of houses feel they have a better chance to provide for any offspring.

      Renters on the otherhand despair because they have less of a chance to purchase their own little nest and figure that the extra money it may cost to now buy makes them ponder on having less children because they may need the money for the increased prices of a house to buy or rent.

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