As home values rise, people are having fewer children

The rate of babies being born is dropping the most in counties where home values are appreciating the fastest, according to a new Zillow analysis. 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 growth, 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 2016.

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.

"There are many highly personal reasons beyond housing costs why some couples may delay having children, or choose not to have them at all," 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.”

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.