By Gerri Elder
The collapse of the housing market is affecting Americans in many ways. Many couples are losing their homes to foreclosure. Others are stuck with homes that they can make the payments on but no longer want. During divorce, couples who own homes are finding it difficult to divide the property that now represents more of a debt than an asset.
According to Moody's Economy, nearly 1 in 6 homes is now worth less than the balance of the mortgage owed. This is making divorce more complicated -- even causing some couples who would like to divorce to stay together. Since homes can no longer be sold for a profit - or at all - many people simply can't afford to get divorced.
Before the recession and downturn of the housing market, most couples were satisfied building equity in their homes. This equity served as a cushion, an investment and an asset to be divided in the event of divorce. Now that the equity in most homes is greatly diminished or completely gone, the marital home is a sore spot during divorce.
When a couple divorces, the marital home is generally sold and the equity divided, or one spouse buys out the other and keeps the home. The New York Times reported that in today's decimated housing market, it can be nearly impossible to determine the value of real estate. Since homes are not selling, no one is sure exactly how far home prices have actually sunk.
With these new challenges in the divorce process, some couples are choosing to live together in the marital home after divorce, reported The New York Times. Some couples are able to live amicably as roommates, while they hope for the housing market to improve so they can sell at a later date. Other couples continue to live together and stop making the mortgage payment, counting on the foreclosure and eviction process taking a while. During that time, each spouse saves his or her money to start over elsewhere.
According to The New York Times, the marital home might be used as a power play in some divorces. When one spouse knows that the other can't afford the house, dragging out a divorce while housing prices plummet can ensure that all equity is gone. In these situations, the spouse that keeps the home effectively "wins" if they can wait until the appraised value of the home is low enough. The person will not have to buy out or can pay very little for the spouse's share.
There is little doubt that the economy is responsible for many divorces. It is also evident that the poor state of the housing market is changing divorce strategies across the country.