Photo: Robert Clark
In some white-hot US housing markets, homeowners are “earning” double or even triple the local minimum wage in home equity, according to a report released today by the listing site Zillow.
Housing affordability is proving to be especially challenging for minimum wage earners nationwide. It is estimated that only about one third of median priced homes are affordable to those Americans who are earning the minimum wage.
Nationally, the typical homeowner is gaining $7.09 of equity in their home every working hour — $0.16 less than the federal hourly minimum wage of $7.25. (Zillow assumes a typical eight hour work day and refers to a working-hour as referring to time spent at work, or 2,087 working hours in a year.)
But homeowners in 24 of the 50 largest US cities are in a much more favorable position, especially in booming West Coast tech markets like San Jose, CA.
Home values in San Jose, San Francisco, CA and Seattle, WA are appreciating more than 3.5 faster per working hour than the cities’ minimum wage earner’s pay.
In San Jose, the typical homeowner is earning $99.81 in equity in their home for every working hour while minimum wage earners in the city are paid $13.50 per hour. This means the typical San Jose home is earning over seven times the local minimum wage, says Zillow.
And while the average hourly wage in the San Jose metro area is $43.71, that is still over two times less than the equity earned by the typical homeowner per working hour.
San Francisco home values have been appreciating at a rate of more than four times the city’s minimum wage ($14). And, in Seattle, which has the highest minimum wage among all of the cities analyzed ($15), the typical homeowner is gaining $54.24 of equity per working hour.
The phenomenon isn’t just confined to the West Coast — home values in New York City are appreciating $42.17 per working hour while the local minimum wage is $13.00.
“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,” says Zillow Senior Economist Aaron Terrazas in the digital release.
But there is a difference between equity “earnings” and a paycheck. Unlike a regular paycheck, equity is available once a homeowner decides to sell and is still then subject to taxes and other expenses and fees.
“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,” Terrazas says.
Click here to read the entire release.