American Families Need To Spend 66% of Their Monthly Income To Afford a Mortgage and Child Care

• In some of the nation’s largest metros, new homeowners would have to put nearly all of their income, or more, toward mortgage and child care costs.
• In 31 of the largest 50 metros included in Zillow’s new analysis, families looking to buy a home can expect to spend more than 60% of their income on a new mortgage and child care. 

Parents looking to buy a home in the U.S. would need to allocate 66% of their income to cover a mortgage and child care — a sharp rise from nearly 50% in 2019. That’s according to a new Zillow® analysis that shows how little income would remain for potential home-buying families to spend on essential monthly living expenses.

Zillow’s analysis found that the typical American family can expect to spend $1,984 per month on child care and $1,973 on a monthly mortgage payment (assuming 10% down, an interest rate of 6.61%, the rate in early January, and the typical home price in each metro). With the monthly median household income sitting at $6,640, that leaves $2,683 for other necessary expenses: food, health care, transportation, insurance, taxes, etc. 

The housing market is in the midst of an affordability crisis, with the typical U.S. home value sitting at 41% above pre-pandemic levels. This rapid home price appreciation, coupled with mortgage rates that recently hit decades-long highs, means many home buyers must make trade-offs in order to afford other necessary expenses, such as child care. The cost of child care jumped during the pandemic as well; in 2019, the typical American family spent 27% of its monthly income on child care, but today, it spends nearly 30%.
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nAffordability guidelines suggest housing should cost no more than 30% of a family’s monthly income, and the U.S. Department of Health and Human Services recommends child care should cost no more than 7% of monthly income. However, the typical household well exceeds these guidelines in every market Zillow analyzed. In 31 of the 50 metros with available child-care cost information for this analysis, families looking to buy a home can expect to spend more than 60% of their income on a new mortgage and child care. 

The cost burden is even more pronounced in the most expensive markets. In Los Angeles, prospective buyers would need to spend 121% of their income on a new mortgage and child care. In San Diego, families would need to spend 113%, and in Seattle, the share is 92%. 
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Methodology:

In January 2023, the Women’s Bureau of the U.S. Department of Labor released the National Database of Childcare Prices, which contains county-level weekly child care prices from 2008 to 2018, with separate estimates for infants and toddlers, counts for households with full-time child care needs (households with kids younger than 6 and with either two working parents or a single working parent). Soon after, Child Care Aware released estimates for average annual child care costs from 2017 to 2022. Using both of these datasets, Zillow Economic Research estimated metro- and state-level child care costs from 2009 to 2022 for the typical family with 1.94 children, at the height of the family’s challenge: when “both” of those kids would be small children in daycare. 

We did this by taking the average across each metro’s member counties in 2016 (the largest sample year), weighting the contribution of each county by the number of households with kids younger than 6 and with either two working parents or a single working parent (also in the National Database of Childcare Prices).

In order to uncover the change in child care prices in any one place and not the impact of adding or losing cheaper or more expensive counties from the dataset, we used child care cost estimates in only those counties with data available for the full history from 2010 to 2022 to create a time series of weighted averages whose rates of change can be used to chain the 2016 average forward to 2018 and back to 2009. 

To incorporate the surge in child care pricing during the pandemic, we updated all regions (states and metros) to 2022 prices with the same national series from Child Care Aware from 2017 to 2022. 

[1] Assuming 1.94 kids.