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The typical American family can barely afford both a house and child care in most of the country’s largest cities. Monthly costs are now running roughly $2000 apiece for these two big family expenses, with the typical child care bill costing slightly more than a mortgage payment.
A recent analysis from real estate listing site Zillow found that the combined cost of buying a home and child care has swelled significantly since pre-pandemic times. In 31 of the 50 biggest U.S cities today, parents would need to devote more 60% of their monthly household income toward these expenses.
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Child care and mortgage costs rising
Parents may have felt like they had it bad in 2019, when the cost of housing and child care was 50% of the typical household’s income. But today, the average U.S. home value is 41% above what it was back then. Zillow’s analysis shows that between these home price increases, high mortgage rates and increases on other essentials like child care, the average U.S. family is in quite the financial pickle.
A mortgage payment and child care now takes up an astounding 66% of the average household’s monthly income in 31 of the 50 cities analyzed. That’s way more than the U.S. Department of Health and Human Services’ household budget recommendations, which caps housing costs at 30% of a household’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 takes up 100% or more of the median household income for those areas. To give you an idea of just how expensive that is, the median household incomes in these cities are all above $100,000.
In terms of dollars, the typical American family would need to allocate $1,984 a month for child care and $1,973 a month toward a mortgage payment, assuming average home price in each city, a 10% down payment and 6.61% mortgage rate. Given that the median monthly household income is $6,640, that would only leave $2,683 for necessities like food and transportation, according to Zillow.
People who bought homes roughly between 2013 and 2020 are in a much better position than homebuyers today thanks to historically low mortgage rates during this period. It's been rough for those who bought a house more recently. Monthly mortgage payments for the average homebuyer skyrocketed to $2,637 in July 2023, an all-time high (the median home sale price also hit a record-breaking $380,250 the same month).
The housing affordability crisis isn’t expected to improve much in 2024. While mortgage rates have cooled a bit in recent months, data from Freddie Mac shows the average rate on a 30-year home loan jumped back up to 6.77% for the week ending Feb. 15. Even if rates fall according to experts' predictions, a forecast from Realtor.com expects they'll only drop to 6.5% by the year's end.
Home prices aren’t expected to see massive spikes like they did in the past few years, but they also aren’t likely to decrease much, keeping would-be buyers on the sidelines. Inventory is expected to remain low as homeowners stay locked into their current mortgage rates.
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10 cities with most unaffordable housing and child care
These are the 10 metros where housing and childcare expenses take up the greatest share of the median household income, according to Zillow.
- 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)
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FAQs
Lenders assess childcare in different ways; some will ask you to provide your individual childcare costs on your application, and then it will consider them in the wider picture of your income and spending, others will ask if you have kids, and assume you'll be paying certain costs for childcare.
What is the average cost of childcare in the US annually? ›
Nationwide, the average annual cost of care rose to $11,582 per child last year, up 3.7% from the prior year. It was the smallest annual increase since the pandemic began and trailed inflation.
What are at least three of the costs that make up a mortgage payment? ›
Transcript: The components of a mortgage payment
There are four components to a mortgage payment. Principal, interest, taxes and insurance.
What percentage of income do many families spend on childcare? ›
According to the latest LendingTree study, families who pay for child care spend a significant average of 18.6% of their income on it.
Is childcare considered monthly debt? ›
Yes, the VA considers childcare expenses as debt.
Why is childcare so expensive in the US? ›
Staff-to-child ratios
One of the primary reasons why child care is so expensive is that babies and toddlers need the attention of focused and nurturing staff who have adequate time to develop true familiarity with children. This requires low staff: child ratios, ideally 1:4 or fewer.
When did daycare become so expensive? ›
Since 2000, the cost of childcare has risen 115%, well exceeding the 74% growth in overall inflation. In 2021, the average annual cost of childcare in the US was roughly $10,600 per child, per the advocacy organization Child Care Aware.
Which country has the highest childcare costs? ›
For couples earning 67 per cent of the average wage, the UK is the most expensive country for childcare, alongside the Czech Republic and Cyprus. For couples earning the minimum wage, the UK is the second-most expensive country, after the Czech Republic.
What is not included in a typical mortgage payment? ›
While principal, interest, taxes, and insurance make up the typical mortgage, some people opt for mortgages that do not include taxes or insurance as part of the monthly payment.
What is the typical cost of a mortgage? ›
The average mortgage payment is $2,883 on 30-year fixed mortgage, and $3,759 on a 15-year fixed mortgage. But the median payment is likely a more accurate measure for many: $1,775 in 2022, according to the US Census Bureau.
7 Expenses On Top of Your Mortgage Payment
- Property Taxes – (Fluctuates annually) Let's start with often the most expensive: taxes on your home. ...
- Homeowner's Insurance – (Fluctuates annually) ...
- Homeowner's Association Fees – (Fluctuates annually) ...
- Emergency Fund – (Optional) ...
- Cosmetic Repairs or Improvements – (Optional)
Housing is the most expensive cost associated with raising a child, making up 29% of the total expenses. Based on the USDA's annual cost estimates, you're looking at about $5,235 going toward housing alone each year. Where you choose to raise your family will impact the overall amount you spend on housing each year.
How much do parents spend on childcare in the US? ›
On average, Americans spend $321 per week on daycare
According to the study, 47% of families spent over $1,500 on monthly childcare costs in 2023. But costs varied depending on the type of childcare, and 49% plan to spend the same amount in 2024.
What country spends the most on childcare? ›
No country spends more than Iceland, at about 1.7% of the country's GDP. A New York Times analysis of OECD data published in 2021 found that the US spends roughly $500 a year per child on early childhood care, compared to over $14,000 for the average OECD country.
What income is considered for mortgage application? ›
Closing thoughts: Qualifying income for a mortgage
Your gross income: The total amount of your earnings before taxes and deductions are taken out. In addition to your monthly income from wages earned, this could include social security income, rental property income, spousal support, or other sources of income.
What factors affect the costs of childcare? ›
Factors Affecting Childcare Costs
Staffing: Hiring and paying qualified staff is a big expense. Programs need to meet staffing ratios and compensate employees fairly. Materials and Furniture: Creating a safe and stimulating environment for kids means investing in quality materials and furniture.
Can a parent hold a mortgage for their child? ›
Rather than giving your child cash for a home purchase, you could buy a home and play the role of lender. In essence, parents act as the bank, extending a loan to their child to purchase a property, typically under more favorable terms than what a traditional lender might offer.
What is a childcare expense letter? ›
A child care letter is required on a VA loan if the borrower has children under the age of 12. A VA loan requires that childcare expenses are counted as liabilities for qualification purposes. The letter states what if any child care costs are incurred each month, and if none are incurred the reason.
