Birth Rates are Falling Most where Homes are Appreciating Fastest

SEATTLE, June 6, 2018 /PRNewswire/ -- The rate of babies being born is dropping the most in counties where home values are appreciating the fastest, according to a new Zillow® analysisⁱ. An extra 10 percentage-point rise in home values is associated with an extra 1.5 percentage-point drop in birth rates for 25-to-29 year old women.

The trend is most pronounced in pricey California markets, as well as in Austin, Texas, Brooklyn, N.Y. and Seattle. In Los Angeles County, the birth rate among women aged 25 to 29 fell 17 percent from 2010 to 2016, while home values rose 31 percent. Zillow found that 2,588 fewer babies were born to women in this age group in Los Angeles County in 2016 than would otherwise be expected given local home value growthⁱⁱ, the greatest drop in births among all counties analyzed.

In San Diego County, the birth rate fell 19 percent while home values rose 34 percent, which is associated with 1,148 fewer babies than would be implied by the area's home value growth alone. The birth rate in Travis County fell 22 percent, while home values rose 33 percent -- this is associated with 585 fewer babies than expected.

At the onset of the Great Recession, the birth rate began falling, dropping from a high of 2.12 babies per woman in 2007, to 1.93 by 2010. It's common for birth rates to tick up as the economy improves, but the birth rate continues to fall even as the economy has recovered, to just 1.82 by the end of 2016ⁱⁱⁱ.

Raising a child is an expensive proposition, and many couples may be questioning whether now is the right time to have kids or may be choosing to move to more affordable communities before starting a family. Many young adults aim for financial stability before having children, but with rising housing costs, financial stability may be increasingly out of reach -- a 20 percent down payment on the typical U.S. home requires more than $40,000. Home values across the U.S. are appreciating at their fastest pace in 12 years, and are projected to rise another 6.5 percent over the next year.

Counties with the Greatest Drop in Birth-Rate Relative to Home Value Growth from 2010-2016

"There are many highly personal reasons beyond housing costs why some couples may delay having children, or choose not to have them at all, and it's important to remember that correlation does not necessarily mean causation," said Zillow senior economist Aaron Terrazas. "The big question this research raises is whether millennials are simply delaying childbirth into their 30s, or are actually choosing to have fewer children – and so far, the data are mixed. Recently released preliminary data shows fertility rates among 30-something women fell in 2017 for the first time since 2010, an ominous sign, but then again, respondents to recent census surveys indicate they expect to eventually have just as many children as respondents in prior years. Ultimately, this data adds another layer to the argument that rising housing costs are contributing to meaningful delays in achieving a number of key life milestones, including getting married and buying a first home – two very important steps on the road to starting a family."

The birth rate was up in counties where home value growth is weaker. In Pima County, home to Tucson, Ariz., home values have essentially remained unchanged since 2010, but the birth rate is up 5 percent, which accounts for 340 more babies than expected.

Zillow Research

Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with great real estate professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow Group's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.

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ⁱ This analysis relied on the Zillow Home Value Index (ZHVI), and age-specific fertility rates from the Centers for Disease Control and Prevention's National Center for Health Statistics. Counties with fewer than 10,000 women were excluded from the regression to reduce noise. Several different specifications were tested for robustness and yielded similar results.

ⁱⁱ The predicted amount is based on the observed home value growth. For example, according to the trend line Zillow created, Los Angeles County's home value growth of 31 percent from 2010-2016 would on average be associated with a 10% drop in fertility – this is the expected amount. But, fertility actually fell 17 percent, which is an extra 7 percent below the trend line and expected amount, which equates to 2,588 fewer babies than expected.

ⁱⁱⁱ The latest data available.

SOURCE Zillow