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

Lisa J. Dettling, University of Maryland
Melissa S. Kearney, University of Maryland

We investigate how changes in MSA-level house prices affect current period fertility decisions. We hypothesize that an increase in house prices will have a negative price effect on current period birth rates among both potential first-time homeowners and current homeowners who might upgrade to a bigger house with the addition of a child. In addition, an increase in house prices might increase available home equity, leading to a positive effect among current owners. Controlling for MSA fixed effects, trends, and other factors, our analysis finds that short-term increases in house prices lead to a decline in births among non-owners and an increase among owners. Our estimates suggest that a $10,000 increase in house prices leads to a 2.1 percent increase in births among home owners, and a 0.4 percent decrease among non-owners. Our paper provides evidence that homeowners use some of their increased housing wealth to fund their childbearing goals.