The rising burden of housing and childcare costs for consumers

As inflation continues to affect consumers’ monthly bills, more people have had to adjust their budgets and spending habits, with some people unable to pay their essential bills. In particular, the cost of new mortgages and childcare has soared in recent years, making it very challenging for those who have both of those expenses to consider. 

In fact, a recent study conducted by Zillow has found a concerning trend, where a large portion of consumers’ monthly income is now taken up by these two expenses. 

According to the research, in many of the largest metropolitan areas in the United States, new homeowners find themselves allocating nearly all of their earnings towards a combination of mortgage payments and childcare costs.

In Zillow’s analysis of the top 50 metros, it was discovered that in 31 of them, families seeking to purchase a home can expect to spend over 60% of their income on a mortgage and child care. 

Here’s a breakdown of the figures: the average family should budget around $1,984 per month for child care and $1,973 for their monthly mortgage payment. These mortgage payments are calculated based on a 10% down payment, an interest rate of 6.61%, and the median home price in each respective market.

With the current median household income standing at $6,640 per month, this leaves approximately $2,683 to cover other essential expenses such as food, healthcare, transportation, insurance, taxes, and other fixed costs. 

However, the study reveals that this allocation towards just two expenses surpasses what is considered financially prudent. According to Zillow’s affordability guidelines, a mortgage payment should ideally not exceed 30% of a family’s monthly income.

Furthermore, the analysis suggests that households across all markets evaluated by Zillow consistently exceed these recommended thresholds. 

In the nation’s most expensive housing markets, this disparity is even more stark. For instance, in Los Angeles, prospective buyers would find themselves needing to allocate 121% of their income towards a new mortgage and child care, while in San Diego, the figure stands at 113%, and in Seattle, it’s 92%.