The Crushing Cost of Housing and Child Care: Can the Average American Family Survive?
Let’s just call it what it is: being a grown-up is expensive. These days, the average American family is stuck playing financial whack-a-mole—dodging bills while trying to afford both a roof overhead and decent day care for the kiddos. In most big U.S. cities, each of these expenses alone comes in just shy of $2,000 a month. To top it off, child care has the nerve to cost even more than your mortgage. Can you believe that?
According to the latest Zillow analysis (aka, the experts who know way too much about our bank accounts), the combined cost of owning a home and securing child care has skyrocketed above pre-pandemic levels. Brace yourself: in 31 out of the 50 largest U.S. cities, families now cough up more than 60% of their monthly income just to keep Junior in preschool and a roof over their heads. Pass the coffee—this calls for a double shot.
CHILD CARE AND MORTGAGE COSTS RISING
Let’s rewind to 2019 for a second. Back then, families were already feeling squeezed as housing and child care gobbled up half their earnings. But since then? Home values have shot up faster than my caffeine intake on deadline day. Zillow says that the average U.S. home is now 41% pricier than before the pandemic swooped in. Factor in mortgage rates that just won’t chill out and the ever-rising costs of everything from diapers to day care, and you’ve got yourself a recipe for serious wallet woes.
Here’s a jaw-dropper: across those 31 big cities, shelling out for mortgage and child care eats up a whopping 66% of the typical household’s monthly income. For context, the U.S. Department of Health and Human Services recommends keeping housing to 30% of your paycheck, and child care to just 7%. (Ha! I’d like to have a word with whoever made up that guideline.)
In certain California hotspots—Los Angeles, San Diego, San Jose, San Francisco, and Oxnard—families spend every last penny (or more!) of their $100K+ median income just to cover the two biggest bills. That’s right: housing plus child care equals 100% or more. Cue the collective sigh.
On average, families are dropping $1,984 every month for child care, and $1,973 for a mortgage. (Just writing that makes me sweat.) Zillow’s math assumes a median city home price, a 10% down payment, and a 6.61% mortgage rate. If you’re bringing in $6,640 monthly as a household, you’re left with about $2,683 for, well, living: groceries, gas, Netflix, the works.
Of course, there’s a silver lining—if you bought your home between 2013 and 2020, those low, low mortgage rates are probably making you feel like you hit the jackpot. But buyers in the past couple years? Ouch. They’re staring down average monthly mortgage payments of $2,637 (thanks, July 2023 median price of $380,250).
Unfortunately, the so-called housing affordability crisis doesn’t look like it’ll let up in 2024. Freddie Mac says the average 30-year mortgage rate bounced back up to 6.77% mid-February and may only slightly ease to 6.5% by year’s end. As for falling prices? Don’t hold your breath. Inventory is still tight, thanks in large part to folks clutching their low-interest mortgages like a golden ticket.
10 CITIES WITH MOST UNAFFORDABLE HOUSING AND CHILD CARE
Think your city’s expensive? Here are the ten metro areas where housing and child care swallow up the biggest chunks of local median income, courtesy of Zillow. Californians, brace yourselves:
- Los Angeles, California: 121% of local median income
- San Diego, California: 113% of median income
- San Jose, California: 109% of median income
- San Francisco, California: 106% of median income
- Oxnard, California: 100% of median income
- Riverside, California: 93% of median income
- Seattle, Washington: 92% of median income
- Boston, Massachusetts: 92% of median income
- Providence, Rhode Island: 91% of median income
- Fresno, California: 87% of median income
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Let’s face it: between high mortgage rates and day care bills that make you question your life choices, navigating family finances these days is no walk in the park. Still, with a dash of strategy, some solid advice, and maybe a helpful mortgage lender or two, there’s hope for making it all work—at least most days! Chin up, fellow grown-ups: we’re all in this together.