The typical American family can barely afford a home and child care in most of the country’s largest cities. Monthly costs now total about $2,000 each for these two large household expenses, with the typical child care bill costing little more than a mortgage payment.
A recent analysis by real estate listing site Zillow found that the combined cost of buying a home and caring for children has increased significantly compared to pre-pandemic times. In 31 of the 50 largest U.S. cities today, parents are expected to devote more than 60 percent of their monthly household income to these expenses.
The costs of nursery schools and mortgages are growing
Parents may have felt like they had a bad situation in 2019, when the cost of housing and child care accounted for 50% of the typical family income. But today, the average home value in the United States is 41% higher than it was then. Zillow’s analysis shows that between these increases in home prices, high mortgage rates, and increases on other essentials like child care, the average American family is in a pretty tough financial situation.
Mortgage payments and child care now consume an astonishing 66% of the average family’s monthly income in 31 of the 50 cities analyzed. This is much higher than that recommended by the US Department of Health and Human Services on the family budget, which caps housing costs at 30% of a family’s monthly income and child care at 7%.
And in five California markets – Los Angeles, San Diego, San Jose, San Francisco and Oxnard – the cost of housing and child care represents 100% or more of the median household income for those areas. To give you an idea of ​​how expensive it is, median household incomes in these cities are all above $100,000.
In dollar terms, the typical American family would budget $1,984 per month for child care and $1,973 per month for mortgage payments, assuming the average home price in each city, a 10% down payment, and a mortgage rate by 6.61%. Since the median monthly household income is $6,640, that would leave only $2,683 for basic necessities like food and transportation, according to Zillow.
People who purchased homes between roughly 2013 and 2020 are in a much better position than today’s homebuyers thanks to historically low mortgage rates during this period. It’s been tough for those who purchased a home more recently. Monthly mortgage payments for the average home buyer skyrocketed to $2,637 in July 2023, an all-time high (the average home sales price also hit a record $380,250 in the same month).
The housing affordability crisis is not expected to improve much in 2024. Although mortgage rates have cooled somewhat in recent months, data from Freddie Mac shows that the average rate on a 30-year home loan rose to 6.77% in week ended. February 15. Even if rates fall as experts predict, they will only fall to 6.5% by the end of the year, according to Realtor.com.
Home prices are not expected to see massive surges as they have in recent years, but they are also not likely to fall by much, keeping would-be buyers on the sidelines. Inventories are expected to remain low as homeowners remain locked into current mortgage rates.
10 cities with the most unaffordable housing and child care
According to Zillow, these are the 10 metro areas where housing and child care expenses make up the largest share of median household income.
- Los Angeles, California (121% of local median income)
- San Diego, California (113% of median income)
- San Jose, California (109% of median income)
- San Francisco (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)
- Fresco, California (87% of median income)
More from Money:
How much house can I afford?
The 9 best real estate loans of 2024
As negotiations return to the real estate market, buyers are demanding home guarantees