Homeownership in San Francisco: A Break-Even Proposition

A recent study has revealed that homeownership in the Bay Area, particularly in San Francisco, has become increasingly cost-ineffective. Homeowners now only break even after fully paying off a 30-year mortgage, a significant increase from the 20-year break-even point observed last year. This shift is attributed to rising homeownership-related costs, while rental expenses have remained relatively stable.

Condominium Sales Trends

Interestingly, the fastest-selling condominiums are located outside of downtown San Francisco. Projects such as JS Sullivan’s Maison Pacific in Russian Hill, TRI Pointe Home’s Lofton at Portola, and Prado Group’s 2238 Market have all sold out within a year of their launch. In contrast, nearly all of the 273 condo units currently under construction are situated downtown, where buyer demand appears to be lower. Compass agent John Townsend noted that condo buyers typically prefer neighborhoods outside the downtown area.

Co-Living Resurgence Amid AI Boom

The artificial intelligence boom has spurred a resurgence in co-living arrangements in San Francisco. Young tech workers are increasingly opting for affordable, compact living spaces, often referred to as "tech dorms." Local co-living landlord UrbaNests operates such accommodations, where residents, primarily foreign-born engineers, share meals and ideas. Similarly, South Africa-based Neighbourgood has opened three co-living buildings with a total of 53 rooms in the city, with plans to expand to 1,000 units in the next 24 to 36 months. 

Accessory Dwelling Units Face Delays

Builders and homeowners in the Bay Area have raised concerns about significant delays in the approval and construction of accessory dwelling units (ADUs), commonly known as "granny flats." Pacific Gas and Electric, the state's largest utility company, has been accused of causing delays of a year or more, leading to increased costs for homeowners. While PG&E acknowledges the issues and states efforts are underway to improve processes, many challenges remain beyond their control. 

Sources:

• The Real Deal: Homeownership a Break-Even Investment in San Francisco

• San Francisco Chronicle: Renting versus buying a home: The math has changed in the Bay Area's biggest cities