With Home Prices Soaring, Has Success Spoiled San Francisco?

Jul 19, 2013

Joe Kelso and John Winter probably waited too long. The couple has been together for a dozen years but only got serious recently about buying a house in San Francisco.

They saved enough to be able to afford anything under $500,000, but houses at such prices are now few and far between.

This spring, the median home price in San Francisco topped $1 million, up by a third from last year.

There are still houses listed for under $400,000, but that's just to get the bidding going. Those types of properties will sell for more than $500,000, while still requiring maybe $100,000 worth of work.

"By the time we made our first offer in February, prices had shot up $100,000 to $150,000," Winter says. Since then, they've been outbid seven more times.

Their experience has become typical. With San Francisco drawing both employees and tech companies from Silicon Valley, houses have become an unaffordable luxury for people in the middle class and even the very highly paid.

It's changing a city historically known as friendly to outsiders wanting to pursue alternative lifestyles. That's harder to do in an environment where brokers speak blithely of $600,000 and $700,000 "starter homes."

With people unable to afford San Francisco, prices are jumping in neighboring cities such as Oakland as well.

"Buyers are facing frustration," says Colleen McFerrin, a real estate agent. "Prices are going up and when they lose one or two [houses] they begin to panic."

Higher Costs All Around

San Francisco has long attracted waves of people seeking a pleasant, progressive life — immigrants and hippies, gays and beatniks.

Jorge Cino, an aspiring fiction writer, was drawn all the way from Argentina. "I loved the city and I did love its bohemian, reckless culture," he says.

But with prices going up — spiking rents are driving up costs for restaurant meals and consumer goods as well — Cino says "you can feel the changes in the air."

"S.F. is now at a time in its history when the sight of a man w/a pony tail brings a pang of nostalgia," John King, the San Francisco Chronicle's architecture critic, tweeted on Tuesday.

Forget the bohemians. The city has long battled with Seattle for the crown that comes with having the fewest children per capita, but at this point it appears to have that honor just about all sewn up.

There are lots of stories about doctors who can't afford to live in the city, or at least feel stretched thin if they stay. "They have lower incomes than people in tech and more student debt," says Abbe Day-Merchant, McFerrin's partner at Herth Real Estate.

With tech startups creeping up from their enclave south of Market Street, the main corridor through downtown, it's putting pressure on "everybody" in commercial space as well as residential, says attorney Michael Rubin.

"They are forcing rents much higher and affecting everyone else in the downtown and near-downtown areas," he says.

San Francisco Becoming A Suburb

Cino, who works in communications for a corporate foundation, is sharing a one-bedroom apartment in Noe Valley that costs $2,400 a month. It's a bargain at the price.

San Francisco has rent control, and a new tenant could easily pay a third more in that neighborhood. Noe Valley is part of a cluster of areas — Bernal Heights, Glen Park, the Mission — that have become desirable in recent years because of their easy access to Interstate 280, and thus to the tech companies in Silicon Valley and other points south.

Access has become yet easier, with companies such as Google, Facebook, Apple and Yahoo running shuttle buses directly from their campuses to those parts of town.

The buses, offering "coddled commuting experiences," have become a much-derided symbol of the antagonism many longtime residents feel toward tech workers able to plunk down a million in cash for a house or condo.

"I've heard about the complaints," says Nate, who works on Google's Android operating system, as he waits for a table for Sunday brunch at Grub, a restaurant in the Mission.

"We'd probably hear more about them, if the tech companies gave us time to think about anything other than work," he says. (Nate asked that only his first name be used, but you can probably Google him.)

The Young And the Wealthy

The Mission has long been home to many working-class Hispanics. There are still plenty of burrito joints, but they've been joined by high-end restaurants and places that sell blueberry-Earl Grey cupcakes for $6 and wooden toy wands for $12.

Such businesses are thriving. With the housing market going crazy again, gentrification is perking up there as an issue, as well as in other cities such as Philadelphia and New York.

Most cities would love to have San Francisco's problems. San Francisco Mayor Ed Lee has worked closely with companies from Twitter to tech startups to encourage them to come or expand.

"In Sweden, success is not encouraged," says Jacob Sempler, a Swede who was recruited to move to San Francisco two years ago by an advertising agency.

Basking in Duboce Park on a sunny Saturday, Sempler says it's "an incredible city," with stunning views and "pretty much every single cuisine within a 10-block radius."

Hoping For A Break

His job allows him to afford a two-bedroom apartment by himself. Not everyone is so fortunate.

Longtime residents and even some homeowners now jokingly refer to themselves as "squatters" if they're able to stay in place despite the waves of new money.

"Cash is king," says Day-Merchant, the real estate broker. Buyers who don't have $1 million in the bank are turning to homier methods — writing personal letters about themselves that they hope will win over sellers who might have some lingering sentimental attachment to the houses they're leaving.

Kelso and Winter similarly hope that personal connections will help them in their quest. Maybe they'll hear about a house before it comes on the market, avoiding another bidding war that would put the property out of their reach.

Especially with interest rates ticking up, they can't afford to bust their personal budget. Winter is assistant manager at the gift shop of the Human Rights Campaign, the gay-rights group, while Kelso manages a help desk at a health care firm.

"We're still hoping for a needle in the haystack," Winter says, "that someone will want to sell to us."

Their desires are modest. They know they're not going to get a house with a view, like the one they lost out on back in February. All they want now is a house with a garage and a garden in a neighborhood where they feel safe.

That might be asking for too much.

"The economy in California for homes is always just out of reach," Winter says.

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