Sunday, November 28, 2004

Finding a Good Deal in San Francisco


FINDING a place to buy in San Francisco is a daunting task for all but the wealthy, as housing prices continue to increase despite a shrinking population and job losses from the bursting of the Internet bubble.

The average price of a single-family home in San Francisco has risen around 16.5 percent in the last year, to $952,715 from $817,976 in 2003, according to the San Francisco Association of Realtors.

Sarah Stangle and her husband, Chris Buck, are both from Connecticut and lived in New York City before moving to San Francisco. Having rented in Manhattan and Brooklyn, they didn't want to move 3,000 miles across the country only to be forced 30 miles outside the city because they couldn't afford to buy anything.

"We didn't want another apartment or loft, which is what we were in before," said Ms. Stangle, 30, who works in advertising. "So we focused on neighborhoods in the city where we could afford an outright house."

Affording a single-family house in San Francisco's more established neighborhoods - like Pacific Heights or Noe Valley - was out of the question for Ms. Stangle and her husband, who works for a nonprofit environmental organization. And with condominium conversions tightly regulated - only 200 units are allowed to convert each year - even if Ms. Stangle and Mr. Buck wanted to go that route, their options would still have been limited and expensive.

To their surprise, single-family homes are available and affordable in San Francisco on the southern side of the city in traditionally working-class neighborhoods where public transportation is less than desirable and the non-Victorian housing stock doesn't make for a "wish you were here" postcard. Neighborhoods like Portola, Excelsior and Bay View don't roll off of most agents' tongues, but increasingly, that's where young professional first-time home buyers are ending up. The latter is where Ms. Stangle and Mr. Buck bought their four-bedroom house with a yard and two-car garage for $449,000 in 2002. Though Bay View is only three miles from downtown, it's still considered a peripheral area by most people who didn't grow up there.

"If someone wants a house, that's where they have to go," said Robin Hubinsky, an agent with Zephyr Real Estate, San Francisco's largest independent real estate agency. "The housing stock that's out there is 90 percent single-family. If you want a house and you want to pay $600,000 or less, you can't go anywhere else. In some of these 'peripheral areas,' it's great to discover that they're really only peripheral in your mind. In reality, they're safe and stable and community-oriented."

While there is a small but growing influx of young professionals into these neighborhoods, they're still a long way from gentrified, Mr. Buck said. In addition to some environmental issues from a closed Navy base, Bay View has a high crime rate.

For the most part, however, the couple feels completely at home. The first weekend they arrived, one neighbor brought over a plateful of food and another neighbor left a bag of apricots on their front porch harvested from her own tree.

Having the space of a house was a great help when Ms. Stangle's mother needed to move in with them because of illness. "We couldn't even have taken her in if we'd purchased a condo in an established neighborhood," Ms. Stangle said. "There just wouldn't have been room." But not only did they have the room, within a year a house across the street came up for sale, which her mother bought for $459,000. "The amazing part about buying both our houses is that we paid asking price. That is unheard of in San Francisco. Houses are routinely priced $100,000 under value to encourage bidding wars, and that is just exhausting."

While houses in these neighborhoods are often sold at asking price, the prices themselves are starting to climb. Single-family homes in District 10, which includes most southern neighborhoods, have increased, on average, by $89,796 in the last year, according to statistics compiled by the San Francisco Association of Realtors.

"Compared to other parts of the city, you can get more house for your money," said Piotr Pawlikowski, another Zephyr real estate agent, who recently sold a house in Excelsior to a single professional woman for $710,000. "Because of that, there is a generational change happening in areas like the Excelsior. But there's no such thing as a bargain in San Francisco."

Stacey Fowler and her husband, Brian Malenfant, both in their early 30's, lived in a one-bedroom rent-controlled apartment for eight years. Then, when Ms. Fowler became pregnant, they knew they had to make a move.

"There's this whole pocket of neighborhoods, all south, near the freeway and heading toward Candlestick Park," Ms. Fowler said. "They're working-class areas, and the houses were built in the 50's and they just kind of got forgotten about. But once we started looking there, it took us less than a month to find a place." They paid $425,000 for a two-bedroom house. Within 18 months, their property, in an area known as the Portola Valley, has appreciated by $100,000, and they're preparing to refinance to take advantage of the increased equity.

"We're right next to McLaren Park," Ms. Fowler said. "Most people don't even know about this park. It has all these rolling hills and trees. When you say where you live, people think it's not a great place, but it's fine. We wanted a diverse neighborhood, and since we moved in, two more families have moved in with babies. So we're very happy."

For first-time buyers who are not inclined to live in those neighborhoods, the only other entry point into the San Francisco real estate market is through a tenancy in common. Stephan Alm and his wife, Sara, teamed up with Vahram Massehian and his wife, Daliah, to purchase a two-unit building as a tenancy in common. They share a $750,000 mortgage and have spent about $45,000 getting the property up to code as required by the condo conversion regulations. Pooling their resources was the only way they could enter the real estate market in Bernal Heights, an established neighborhood that sits on a hill overlooking the Mission District.

"We looked at a few single-family homes in peripheral areas, and it just didn't meet our needs," Mr. Alm said.

While horror stories of failed tenancy-in-common relationships have pushed some buyers into more affordable neighborhoods where they can purchase a single-family house, the arrangement has worked well for the Massehians and Alms. Both couples are now expecting their first child. "We're living parallel lives," Mr. Massehian said. "We'll raise the kids together and share that responsibility as well."


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