Does divorce drive the economy?

On behalf of Stange Law Firm, PC posted in Family Law on Friday, February 21, 2014.

One of the “benefits” of the Great Recession was the reduction in the divorce rate. Of course, whether you view the divorce rate as a “bad” may be a function of how happy you are in your marriage. If you are in a marriage that has soured, and are now looking for a way out, you may find a reduction in the divorce rate as the true “bad.”

When it comes to divorce rate, the state of the economy is inextricably linked to how that rate tracks, whether up or down. Divorce is expensive; both in the sense of paying for your divorce attorneys, court costs and other family law expenses, and in the process of creating two new households out of what had been a single home.

Ironically, while it may be traumatic for those involved in the divorce, that household formation is given as one reason why new housing starts, apartment construction and the demand for home appliances and furniture have improved in the last year.

When dad moves out, he needs an apartment nearby, and he will have to purchase some furniture and other stuff to outfit his new place. If a couple sells their family home in order to divide the assets to form their two new respective homes, they each need a new residence.

Many divorces were placed on hold as the economy crashed and many people either could not afford a divorce, or had underwater mortgages that meant that instead of dividing the proceeds of the family home, they would have had to divide the debt.

As home prices have improved, many of those couples are now heading to divorce court. And apparently, fueling the economy.

Source: Bloomberg.com, “Worsening U.S. Divorce Rate Points to Improving Economy,” Steve Matthews, February 18, 2014

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