My Home Increased in Value During the Marriage: What Happens in a Divorce?

For many spouses in North Carolina, the family home is the most valuable asset in the marital estate. Pew Research states that home equity is the “single largest contributor to household wealth,” and this is something that many North Carolina residents can relate to. Homeownership is especially common among older spouses, although buying a home is much more affordable for even younger individuals in the Tar Heel State when compared to more metropolitan states. Because of these factors, the family home is the most important asset during the property division process of many North Carolina divorces. This process is often complex, especially when spouses need to take into account the increase in home values during their marriages.

Recent statistics show that the real estate market in North Carolina has been fluctuating dramatically over the past few years. This is due to a number of factors – most notably the pandemic. This volatility suggests that even spouses who have been married for just a few years may need to take into account major price changes when approaching divorce. If a married couple purchased a house five years ago, the property is likely valued much higher today. This means that even short-duration marriages may involve complex price calculations in the event of a divorce.

The statistics surrounding North Carolina real estate paint an interesting picture. At the onset of the pandemic, home prices dipped briefly. However, the market quickly rebounded – and it has not looked back since. Starting in 2020, prices began to soar – especially in areas such as Raleigh, Durham, and Chapel Hill. This may have been partly due to the rise in remote work – with many people from big cities realizing that they could move to a cheaper area, enjoy a bigger house, and pay lower monthly living costs. Statistics show that in 2022, about 65% of those moving into North Carolina homes were from out of state.

Current statistics show that the real estate market is experiencing a slight dip in 2023, with both the number of listings and the number of sales dropping. However, homes between $500,000 and $2 million are actually increasing. In addition, the average selling price for each home throughout North Carolina is continuing to increase – up almost 4.5% in the year 2023. When you look further back, the increases are even more dramatic. In April of 2023, the median home price was about $300,000. In April of 2020, that median value was just $200,000.

North Carolina is an equitable distribution state, which means that various factors need to be taken into account when dividing marital property (property that was purchased during the marriage). Separate property (property acquired prior to the marriage) is not eligible for division. That being said, the increase in property value during the marriage may be eligible for division, even if the property itself was acquired prior to the marriage.

For example, let’s go back to that median home value of $300,000 in North Carolina. Assume that one spouse was single when he purchased the home back in 2020 – when the home’s value was just $200,000. What happens if he gets married the day after this home purchase? Over the next three years, the home’s value would have appreciated by 50% – or by $100,000. The initial $200,000 value of the home would remain the separate property of the spouse who purchased the home. However, the $100,000 increase in the home’s value may be considered marital property.

As a result, the spouses may need to divide this $100,000 sum in an equitable manner. The most obvious outcome would be a 50/50 split – giving both spouses $50,000. However, we need to remember that home equity is the most common source of wealth for the average family. In other words, the average family does not have $50,000 in cash lying around – and instead, almost all of their equity is tied up in their family home. This means that in order to access the necessary funds and provide the other spouse with their $50,000, the court may order the divorcing couple to sell the home.

If you have been searching for a divorce attorney in North Carolina, look no further than Arnold & Smith, PLLC. Over the years, we have helped numerous divorcing spouses strive for economic security as they approach divorce. We know that the family home represents the most important asset for many spouses, and this property can often be very complicated to divide in an equitable manner. With our assistance, you can account for factors like price fluctuations in a confident, efficient manner. Book your consultation today to get started.