Renting vs. Buying in SF
In 1993, my husband and I moved in to a sizable one-bedroom apartment on Dolores Street between 18th and 19th. Today, anyone would be jealous of that location, but when we moved in it was a different neighborhood. There were bullet holes in glass panes on the front of the building. Dolores Park was used for little more than drug dealing. Our friends were worried about us moving to a dangerous area. At the time, Good Karma occupied the Dolores Park Café spot, and Bi-Rite Market was full of dusty canned goods and a proprietor that had a shotgun behind the counter. Because of rent control, our monthlies remained low through our 11 years, but when it came time to move, rents had shot up significantly. Meanwhile, the year we moved in, the condo next door sold for $350,000, which we thought was highway robbery. When we moved, the unit sold again, this time for well over $1 million. Our rent may have stayed low, but we were still lining our landlord's pockets with money, while the neighbor gained hundreds of thousands of dollars in equity.
Because the rental market had shifted, buying became a better proposition financially. We were surprised to find a 2-bedroom condo in the heart of Noe Valley within our range. Though the payments were a stretch at first, our mortgage is now comfortably below the going rate for rents in SF and especially Noe Valley. Moreover, the value of the condo has roughly doubled. Purchasing and holding on through the ups and downs of the market was the smartest thing we did with our money.
SF Residential Rents
The real estate market has been challenging for homebuyers these past few years, but for anyone looking to rent a home in the city, it has been distinctly more difficult financially. Homebuyers have the benefit of historically low interest rates, multiple tax advantages and, hopefully, substantial appreciation gains over time; renters enjoy none of those advantages (though admittedly there can be long-term benefits to rent control for renters that qualify). Even with the big jump in home prices over the past 4 years, factoring in the 35% - 40% decline in interest rates and adjusting for inflation, the ongoing monthly cost of homeownership (for someone putting 20% down) is roughly the same as it was in 2007. But average monthly asking rents in the city have surged over 50% during the same period.
This has made home and in particular rental property ownership an increasingly lucrative proposition.
A few samples of home sales by neighborhood for reference. I'm particularly keen on Bayview, where first-time buyers may still be able to find decent values.
These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. How any median or average statistic applies to a particular home is unknown without a specific comparative market analysis. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier.