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Sunday, August 12, 2007
Law - "A little-noted side effect of the property boom of the past decade has been the real-estate-enabled divorce"
That is a quote from a story today in the NY Times titled "Buy Low, Divorce High." More from the story:
Home values might have slid in some markets, but in the New York City region, where prices remain high, divorce professionals like therapists and lawyers, along with real estate brokers, say unhappily married couples are cashing in appreciated homes to underwrite a split.“The equity that there is in real estate is one of the impetuses why there are so many divorces,” said Nancy Chemtob, a Manhattan divorce lawyer, adding that the net worth of her clients has doubled in the past three years mainly thanks to real estate. The price of the average Manhattan apartment was $1.3 million as of June, up 7 percent from a year ago, according to the real estate brokers Brown Harris Stevens.
A spouse who has not worked, like Ms. Kleier’s client, might decide that with a divorce settlement enriched by real estate, it is possible to maintain a comfortable standard of living. Or a breadwinning spouse might recognize that even after dividing community property, it will be possible to live well as a single person.
“No matter what the net worth of the client,” Ms. Chemtob said, “the $3 million apartment is now the $7 million apartment, and the $7 million apartment is the $14 million apartment. Half of a lot is a lot.” * * *
Economists are familiar with this phenomenon. Even though divorce rates are declining over all, as far back as 1977 the economist Gary Becker showed that couples experiencing any unexpected, drastic rise in net worth are at risk of divorce. (The same holds true for a drastic decline in net worth.)
Extrapolating from survey data, Dr. Becker concluded in The Journal of Political Economy that “a greater deviation between actual and expected earnings increases the probability” of divorce.
Although couples who see their incomes rise steadily generally stay together, those who make more money than they ever expected are vulnerable to divorce. They realize that they are less financially dependent on each other and that they might have chosen different spouses if they had more choices at the time, said Dr. Becker, who teaches at the University of Chicago.
Dr. Becker, who won the Nobel Prize in 1992, also explored in his divorce study the economic argument for what many people today call trading up, or finding a trophy spouse.
Noting that 75 percent of men and more than 70 percent of women remarry within 15 years of a divorce, he found that divorced men with higher earnings have the greatest likelihood of remarrying. This implied, in his view, that men who have come into wealth have an incentive to divorce because they believe they could better their situation.
“They feel, given their status now, they can find other people of a type that appeals to them more than when they got married,” he said in a telephone interview.
Kenneth Mueller, an East Village psychotherapist, says he has about a half-dozen clients who are real estate executives. Some, he said, have used windfall wealth from property to strengthen their marriages — like paying for counseling or adopting children. But others are emboldened to divorce and remarry. He said some men conclude that they can find a new spouse because their first wives were “not what I really wanted.”
Posted by Marcia Oddi on August 12, 2007 11:10 AM
Posted to General Law Related