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Homes “Earn” minimum wage or more in nearly half the nation’s largest cities 

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Home values have been appreciating more per working hour than local minimum wage pays in about half of the nation’s 50 largest cities, according to a new Zillow analysisi.

The typical U.S. homeowner is gaining $7.09 of equity in their home every hour they’re at the officeii, slightly less than the federal minimum wage of $7.25.

But homeowners in 24 of the 50 largest U.S. cities are in a much more favorable position, especially those in the booming tech towns of San Jose, Calif., San Francisco and Seattle.

In San Jose, the typical homeowner is gaining $99.81 of equity in their home every working-houriii, but minimum wage in the city is just $13.50. That means the typical home in San Jose is “earning” over seven times local minimum wage. Even still, the average hourly wage in the San Jose metro is $43.71, which is over two times less than local home value appreciation per working-hour.

While homeownership is widely viewed as a good way to accumulate wealth, many renters are struggling to come up with enough money for a down payment to break into the market. Median rent across the U.S. is about 3 percent higher than it was a year ago, making it increasingly difficult for renters to save. On top of that, home values are up 8 percent annually, which means the amount needed for a down payment is a continually rising target.

“As home values continue to rise at a rapid clip, many homeowners have earned more in home equity over the past year than they would have by working a minimum wage job – and in some areas, more than they’d have earned even if they had a job paying a six-figure annual salary,” said Zillow senior economist Aaron Terrazas. “But equity ‘earnings’ are a lot different than the salary typically taken home on the first and fifteenth of each month; it is not money that accumulates directly into a checking account or that can be spent on daily needs. Equity is only available once a homeowner chooses to sell a home, and even then is often subject to various taxes and other expenses. Still, particularly for homeowners that have already or are very close to paying off a mortgage, this supplemental ‘income’ – especially if allowed to accumulate over several years – can essentially serve as a kind of second job that pays directly to a homeowner’s bottom line, without nearly as much actual work involved in collecting it.”

Home values have been appreciating in San Francisco at a rate more than four times the city’s minimum wage, and in Seattle, which has the highest minimum wage among all cities analyzed at $15 per hour, the typical homeowner is gaining $54.24 of equity per working-hour.

A home is often a person’s biggest financial investment, and according to the 2017 Zillow Group Consumer Housing Trends Report, the typical American homeowner has 40 percent of their wealth tied up in their home. A recent Zillow survey found that 70 percent of Americansiv view their home as a positive long-term investment.

Homeowners on the West Coast aren’t the only ones benefiting from a hot housing market. Home values in New York, Las Vegas, Honolulu and Nashville have been appreciating over $6 more per working-hour than the city’s minimum-wage earners make.

In some parts of the country, where home value appreciation is slower, local minimum wage is $10 or more higher than the hourly pace of home value appreciation. In Washington D.C., minimum wage is $12.50 per hour, but home values have been appreciating just $1.53 per working-hour. A similar trend holds true in Chicago and Portland.

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