San Francisco’s reputation as a technology hub isn’t the only status it’s earned. It’s also become well known for its expensive real estate, even topping historically-expensive cities like Manhattan and Los Angeles.
The city has made headlines over the past several years for its insane home prices that continue to increase. In fact, you could make six figures a year and still not be able to afford good housing. One recent news report noted that the cost of living has gotten so high that waiters and similar workers can no longer afford to live or work there, which is having a major impact on the food and beverage industry.
How exactly did San Francisco real estate get so expensive? And more importantly, what can people who are looking to relocate to California for work or other reasons do to find affordable housing?
The Growing Price of San Francisco Real Estate
Just how expensive is San Francisco real estate in 2019? Let’s look at some figures:
- The median home value in San Francisco is $1,353,500, which is nearly six times the national average of $226,700.
- Values have increased 2.9% in the past year alone, and are expected to climb by another 1.4% in the coming year.
- The median list price per square foot is $1,068.
- The median rent is $4,000, compared to the national average of $1,420.
Even in the midst of the housing crisis, San Francisco’s median home value was well over $650,000.
If estimates are accurate and home values rise 1.4% within the next year, this means that the median home value will increase by $13,535, which is just slightly less than a minimum wage worker makes in a year before taxes.
What Affects Real Estate Prices in San Francisco?
Like other markets, many factors contribute to the cost of real estate in San Francisco. But given the city’s unique job market and reputation as a technology leader, the real estate landscape looks a little different.
For starters, San Francisco is a great place to live if you’re able to afford it. It’s home to a professional football team, iconic landmarks, activities galore, culture and entertainment, top-rated restaurants and stores, and high-end jobs that pay well (without considering the cost of living in the city, at least).
Millions of people travel here each year just to visit and explore, while others relocate permanently for work. The more popular a place is, the more job opportunities there are, which is one of the biggest things fueling the city’s growth.
Supply vs. Demand
As with any real estate market, supply and demand largely dictate home values and prices. The more homes on the market, the more options buyers have to choose from, which means homes need to be priced competitively. The fewer options to choose from, the more offers the sellers will likely get, meaning they can pick the highest bidder.
As the city’s job market grows and attracts more people into the area, the less housing will be available. And with a lack of supply comes a high demand with a high price to boot.
We’ve already stated that San Francisco is a tech hub, which is largely responsible for the city’s population boom. Many tech companies pay their workers well (usually in the high five figures or six figures), which logically seems like they can afford to pay more for housing.
Continuing with the issue of supply and demand, San Francisco’s location on a peninsula works against them when it comes to increasing the supply. There’s only so far they can build until properties are either against the water or outside of the city. The availability to build just isn’t there, unless buildings are torn down or reconverted into housing. The best direction for growth is vertical, but zoning regulations make this option nearly impossible.
How to Find Affordable Real Estate in San Francisco
If you’re hoping to relocate to San Francisco, you’ll likely be facing a competitive market and sky-high price tags, especially if you plan on buying a home. If it’s not in your budget, or you simply like to save money, consider a few alternatives.
Areas and neighborhoods near San Francisco like Emeryville, El Cerrito, and Millbrae are within a 30-minute drive to San Francisco and offer housing that’s more affordable. You still get many of the benefits of living in or near the city, such as the huge culture and arts scene and great restaurants, but without the traffic and expense.
Buyers looking for real estate in the Bay area can benefit from working with an experienced, top-rated real estate agent that can help you match your budget to the housing market.
Clever Partner Agents can also help you uncover additional cost savings opportunities, including a $1,000 Home Buyer Rebate that can be put toward a down payment, closing costs, moving expenses, or other needs.
Connect with Clever today for a no-obligation consultation and let us introduce you to a Partner Agent in the Bay Area that can help you find your new home!