Global Major Cities Guide

Overview of buying property in San Francisco, including requirements, costs, and mortgage options.

Sections

1. Housing Costs in San Francisco

San Francisco is one of the most expensive housing markets in the United States. As of 2023:

Median Home Price: The median price for a single-family home is approximately $1.6 million, while condos typically cost around $1.2 million.
Price per Square Foot: The average price per square foot is around $1,000–$1,200, depending on the neighborhood.
Down Payment: A standard down payment is 20% of the purchase price, which can amount to $200,000–$300,000 or more for most properties.

Key Factors Driving Costs:

Limited land availability due to the city’s geography (bounded by water on three sides).
High demand from tech professionals and investors.
Strict zoning laws and building regulations that limit new housing development.

2. Types of Homes Available

San Francisco offers a variety of housing types, each with its own characteristics and price ranges:

Single-Family Homes: These are standalone houses, often with Victorian or Edwardian architecture. They are highly sought after but scarce and expensive.
Condos and Townhomes: More affordable than single-family homes, condos are common in high-rise buildings, while townhomes are multi-level units with shared walls.
Multi-Family Properties: Duplexes, triplexes, and fourplexes are popular for buyers looking to live in one unit and rent out the others.
TICs (Tenancy in Common): A unique San Francisco arrangement where multiple buyers co-own a building but have exclusive rights to specific units. TICs are generally less expensive but come with financing challenges.
Co-ops: Less common than in cities like New York, co-ops involve owning shares in a corporation that owns the building.

3. Home-Buying Procedures

The home-buying process in San Francisco follows standard U.S. practices but has some local nuances:

Step 1: Financial Preparation

Credit Score: Aim for a credit score of 700+ to secure favorable mortgage terms.
Pre-Approval: Obtain a mortgage pre-approval letter from a lender to demonstrate your buying power.
Budgeting: Account for additional costs like property taxes, homeowners insurance, and maintenance.

Step 2: Hiring Professionals

Real Estate Agent: Work with a local agent familiar with San Francisco’s competitive market.
Real Estate Attorney: While not mandatory, an attorney can help navigate complex contracts, especially for TICs or multi-family properties.

Step 3: Searching for a Home

Neighborhoods: Popular areas include:
- Mission District: Trendy, diverse, and vibrant.
- Noe Valley: Family-friendly with a suburban feel.
- Pacific Heights: Upscale with stunning views.
- SOMA (South of Market): Urban and tech-centric.
Open Houses: Attend open houses to view properties and assess competition.

Step 4: Making an Offer

Competitive Offers: Homes often sell above the asking price. Be prepared to bid aggressively.
Contingencies: Offers may include contingencies for financing, inspections, or appraisals, but in competitive markets, buyers sometimes waive these.

Step 5: Closing

Escrow Period: Typically 30–45 days, during which inspections, appraisals, and final loan approvals occur.
Closing Costs: Expect to pay 2–5% of the purchase price in closing costs, including title insurance, escrow fees, and transfer taxes.

4. Property Taxes

Property taxes in San Francisco are governed by California’s Proposition 13, which limits annual increases in assessed value:

Base Rate: The property tax rate is approximately 1.2% of the purchase price.
Annual Increases: Assessed value can only increase by a maximum of 2% per year unless the property is sold or significantly renovated.
Supplemental Taxes: New homeowners may receive a supplemental tax bill to cover the difference between the previous owner’s assessed value and the new purchase price.

5. Financing Options

Given the high cost of homes, financing is a critical part of the process:

Conventional Loans: Most buyers use conventional loans with 15- or 30-year terms. Jumbo loans are common due to high home prices.
Jumbo Loans: Required for loans exceeding the conforming loan limit (around $1,089,300 in San Francisco as of 2023). These loans often have stricter credit and income requirements.
FHA Loans: Federal Housing Administration loans are available for first-time buyers but may not cover the full cost of a home in San Francisco.
Down Payment Assistance: Programs like the San Francisco Downpayment Assistance Loan Program (DALP) provide loans to first-time buyers earning below certain income thresholds.

6. Unique Local Considerations

San Francisco’s housing market has several unique aspects to consider:

Rent Control and Tenant Protections: If you purchase a multi-family property with tenants, be aware of strict rent control laws and eviction protections.
Earthquake Preparedness: Homes must meet seismic safety standards. Consider purchasing earthquake insurance, as standard homeowners insurance does not cover earthquake damage.
HOA Fees: Condos and some TICs have monthly homeowners association (HOA) fees, which can range from $300 to $1,000+ depending on amenities and building maintenance.
Historic Preservation: Many homes are protected under historic preservation laws, which can limit renovations or require special permits.

7. Challenges of Homeownership in San Francisco

Affordability: High prices make it difficult for many to enter the market.
Competition: Cash offers and bidding wars are common, especially for desirable properties.
Zoning and Permits: Strict zoning laws and lengthy permitting processes can complicate renovations or expansions.
Homelessness and Urban Issues: Some neighborhoods face challenges related to homelessness, which may impact property values or quality of life.

8. Cultural and Community Aspects

San Francisco is known for its diversity, progressive values, and strong sense of community. As a homeowner, you’ll have opportunities to engage with:

Neighborhood Associations: Many neighborhoods have active associations that organize events and advocate for local issues.
Community Events: Farmers markets, street fairs, and cultural festivals are common.
Sustainability Initiatives: San Francisco is a leader in green building practices and sustainability. Many homeowners invest in solar panels, energy-efficient appliances, and water-saving landscaping.

9. Tips for Prospective Homeowners

Work with Local Experts: A knowledgeable real estate agent and mortgage broker can help you navigate the market.
Be Patient: Finding the right home in San Francisco can take time due to limited inventory and high competition.
Plan for the Long Term: Given the high costs, homeownership in San Francisco is often a long-term commitment rather than a short-term investment.

Conclusion

Homeownership in San Francisco is a rewarding but challenging endeavor. The city’s high housing costs and competitive market require careful financial planning, local expertise, and a clear understanding of the unique aspects of the market. By preparing thoroughly and working with experienced professionals, you can successfully navigate the process and enjoy the benefits of owning a home in one of the world’s most iconic cities.