The American Dream appears increasingly elusive. Moreover, the unaffordability of the house featuring a white-picket fence and the presence of a nanny to attend to the children is not the sole factor at play. For many, they remain inaccessible. The issues surrounding affordability in America are indeed significant. A deteriorating labor market indicates that salary increases are diminishing. Prices have been on an upward trajectory, especially for essential items such as groceries and electricity. Wages have indeed surpassed inflation for several years, resulting in many Americans earning significantly more than they did prior to the pandemic. What accounts for the persistent economic pessimism? The response may hinge more on what Americans are unable to acquire, regardless of cost. Examine the dynamics of housing and child care. A prolonged stagnation in the housing market has hindered a generation of first-time buyers and forced expanding families to remain in inadequately sized homes. In many regions of America, there exists a significant shortfall of child care professionals capable of adequately attending to the needs of children belonging to working parents. This situation has placed numerous Americans in a challenging predicament: Many have ascended into elevated tax brackets yet find themselves unable to reap the benefits associated with their increased income, while others perceive a growing disparity in their financial standing.
The expense associated with purchasing a home has escalated significantly in recent years, primarily due to a housing market that has remained historically stagnant, coupled with mortgage rates exceeding 6% – three times their level from merely a few years ago in the immediate aftermath of the pandemic. Sales of existing US homes have remained stagnant for several years, maintaining an annual rate of approximately 4 million since late 2022, as reported. Aside from the brief period in the spring of 2020, the current levels of home inventory and sales have persisted at or near their lowest levels since the conclusion of the housing and financial crisis in 2010. The cessation of homebuilding during the 2007-2009 housing crisis significantly contributed to the exacerbation of already high home prices, and the sector has yet to achieve a full recovery. Currently, the United States faces a deficit of approximately 4 million homes necessary to rectify the supply shortage and restore housing affordability in the nation, as indicated. To contextualize this: the total count of vacant housing units – encompassing both rental and sale properties – is at its lowest level in the last forty years. “The reason we have an affordability issue is a supply issue,” stated Chen Zhao, head of economics research at Redfin. “A discrepancy exists between the locations of opportunity and the levels of affordability.” The most rapidly expanding markets are typically those that offer the greatest employment opportunities, such as the New York metropolitan area and San Francisco. It is exceptionally challenging to construct in those areas.
Kim Sheldon and her three children have resided in the same rental property for a decade, having relocated to Holden, Massachusetts, situated just outside of Worcester. While she expresses satisfaction with her current rental situation, her interest has been aroused by the emergence of nearby homes on the market. “I thought, ‘Oh, those are so cute, let me just look,’” she remarked. “Upon examination, I observe that the price stands at $650,000 for a three-bedroom, two-bathroom, single-floor ranch home.” For the single mother earning a teacher’s salary, the American Dream has never seemed more unattainable. “I attended college, I have been employed throughout my life, and given the current costs of living, we manage to get by; we certainly do not live in luxury, nor is that a necessity,” she stated. “Do I wish we could possess our own residence?” That would be remarkable. However, she is concerned about the implications that the financial burden of homeownership may have on her children. Housing affordability is significantly higher in the Sun Belt, with states such as Texas, Florida, and Georgia ranking among the most conducive for construction and offering the lowest costs. However, their popularity is diminishing as return-to-office mandates have compelled many individuals to relocate – including those who capitalized on the affordability arbitrage to work remotely in areas where they could secure more housing for their financial investment. Even in those regions, however, certain segments of the housing market continue to be inaccessible. Individuals currently in the housing market are encountering a situation where limited inventory has sustained elevated prices, while mortgage rates remain above 6% – significantly higher than the exceptionally low 2% rates that some secured during the pandemic.
“Individuals are hesitant to sell as they prefer to retain their current mortgages with a 2% interest rate … the supply side is constrained,” stated Steve Mercer. “There are numerous new constructions in the vicinity we are considering, yet their prices exceed my initial expectations.” As the prices of various goods and services continue to rise, the financial strain associated with homeownership becomes increasingly pronounced. The Baby Boomer generation predominantly acquired assets at relatively low prices, which subsequently appreciated significantly, alongside benefiting from declining interest rates – akin to a lottery ticket that facilitated their accumulation of wealth. However, individuals entering the market at this juncture are acquiring assets at elevated prices, which analysts do not anticipate will experience substantial increases in the near term, alongside interest rates that are not projected to decline markedly in the foreseeable future. “I believe that for the younger generation, there exists a palpable discontent stemming from the perception that the American Dream has become increasingly unattainable,” Zhao remarked. “Young individuals who have struggled to gain entry into the job market find themselves in a challenging predicament, unable to discern a clear path forward.” Historically, the largest monthly expenditure for Americans has been housing. However, for an increasing number of households, the expense of child care readily rivals that primary expenditure. In almost every state across the United States, the cost of child care for two children surpasses that of mortgage or rent payments. This observation comes from the advocacy organization Child Care Aware, which reported that the average annual expense for child care reached $13,128 in 2024, reflecting a 13% increase compared to the previous year. The absence of affordability, nonetheless, represents only a symptom within an industry where operators are progressively encountering a “grim financial bind,” as indicated. “Child care problems include two other elements, which are availability and quality,” stated William T. Gormley. “All of these issues are interconnected.” While residing in Iowa, Mercer and his wife faced challenges in securing child care for their young son. “We have a 16-month-old that we withdrew from child care, due to a combination of a negative experience and the associated costs,” he stated, highlighting that the monthly expense back in Iowa was $1,800. “The rationale for enrolling him in daycare has proven challenging, leading to my wife taking on the role of primary caregiver at home.” Insufficient funding and inadequate compensation have led to labor shortages, a situation now further intensified by reductions in immigration, resulting in what are termed “child care deserts.” The financial burden is transferred to families, who frequently perceive the costs as prohibitively high.
According to Gormley, an early childhood education policy scholar and co-director of the Center for Research on Children in the United States, wages for child care workers and those in early education are lower than 97% of all US professions. “That is because the child care workforce in almost every state is hanging by a slender thread,” Gormley stated. “The child care workforce encounters systemic challenges stemming from the limited government support for child care in the United States.” The monthly financial obligation for American families regarding child care is increasing: Costs associated with daycare and preschool are escalating at nearly twice the rate of general inflation, according to data. According to Gormley, these escalating costs are impacting families during particularly challenging periods in their lives. “They are relentless, and you cannot ignore them,” he stated. “The sole method to disregard child care costs is to remain at home with your children.” For numerous working families, that is simply not a viable option. The repercussions within the labor market and the wider economy are concerning. A report indicates that elevated child care costs exert a direct negative impact on the labor force participation of mothers. As expenses increase, households tend to reduce spending, leading some parents—typically mothers—to exit the labor market in order to offer full-time caregiving. In 2025, there was a notable decline in women’s labor force participation rates, marking a reversal of some of the significant progress achieved in the aftermath of the pandemic. The departure from the labor force was primarily influenced by women with children under the age of five.