Real Estate Market Crash Effects Divorces

The economic effects of the 2008 real estate crash have rippled across American society in surprising ways. The vicious cycle of contraction of the job market and resultant restriction of consumer spending were expected, since they have been present in every prior recession and depression. However, the effect on divorcing couples has been a surprise, especially since divorce was just beginning to lose its stigma during the last major market contraction, the stagflation era of the late 1970's and early 1980's.

Especially when there are no children, and thus no desire to keep them in familiar surroundings, many couples who are divorcing decide to sell the family home to simplify the problem of splitting the marital goods so they can each go their separate ways. However, that plan assumes that a house will sell in a reasonable amount of time. As the number of homes sitting on the market in most areas continue to climb, couples are finding it difficult if not impossible to unload the family home and move on. When the home does not sell, the divorcing couple can find themselves stuck with it, and thus without the cash to move on to separate dwellings. If there are children, it can also complicate the problem of child support payments.

As a result of these problems, we are seeing a trend toward post-marital cohabitation, that is, the former couple who are now no longer married to each other are having to continue to live under the same roof. If it sounds like the description of a bad sitcom, it shouldn't be surprising. Until the present crisis, it was pretty much unheard-of for an American couple to continue living in the same house after a divorce. It was something you heard about if you had immigrant friends from the former Communist countries of Eastern Europe where planned economies led to perpetual housing shortages, but it didn't happen here.

But as it takes longer and longer for homes to sell, divorced couples discover they literally can't afford to live anywhere else until the house sells. This is especially true for older couples on fixed incomes, or for younger couples with children who need adequate space for them in each dwelling. That means they're stuck living under the same roof, using the same bathroom and kitchen, seeing each other on a daily basis, with the issues that drove them apart in the first place grinding and grinding on their minds and souls. Not exactly a good situation for someone who just wants to put a mistake behind them and move on to a new life. In some cases, the situation has become so desperate that a divorced couple who simply can't abide each other's presence any longer have gotten to the point where one of them moves in with their natal family just to get out of an intolerable situation.

Regardless of the situation, couples in such situations find they have limited options for selling the family home. In situations where their mortgage is underwater because the value of their home fell after the housing boom ended, they must decide whether it is better to remain in the home until the market improves or try get out with a short sale. The arguments over what to do with the family home have escalated to the point that in many cases judges are being put in the middle to sort matters out. This is particularly common in situations where one person wants to remain in the home until the market improves while the other wants to go ahead and sell the home even if it means doing so at a loss. In most situations judges are hesitant to issue orders to sell the home, assuming that the market will eventually rebound.

Some divorcing couples don't even have the option of choosing whether to ride out the downturn or sell at a loss. Especially where job loss and consequent contraction of the family's financial circumstances have been a major force in breaking the couple apart, they may not be able to keep up with mortgage payments and literally have no choice but foreclosure. This situation complicates divorce proceedings by delaying the division of marital property, and can often lead to blaming and recriminations both for the loss of the home and for the delay in getting the divorce finalized.

More generally, the collapse of the housing market and the resulting financial downturn has had its effect on people's ability to get a divorce, even people who don't own a house. At the lowest income levels, people may not even be able to come up with the necessary money to pay filing fees, and as a result are apt to separate without the legal formalities. As a result of the lack of the structure of a formal divorce decree, children are more likely to be abandoned by a parent and live in poverty. And whether or not there are children, the separating spouses cannot remarry without the formal divorce decree, so they are more likely to enter unstable temporary relationships with live-in boyfriends or girlfriends.

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