What Should a “Starter Home” Cost In SF?

Take a moment to consider 2574 46th Avenue, a two-bed, one-bath Outer Parkside classic now for sale: The new listing calls this a “wonderful starter home,” but can/should a “starter home” really cost $1.55 million?

One perspective is that the concept of a “starter home” is anachronistic in the context of a city like San Francisco or with certain kinds of buyers, like American Millennials; the notion of buying a cheap first-time home and selling in a few years to upgrade just might not be plausible for all but very high-income households anymore.

Thus far the median sale price for all SF homes for 2021 is over $1.42 million. In a recent city comparison, the San Francisco Chronicle priced a “starter home” at nearly $1 million in SF; while that is indeed on the lower end of the scale relative to average prices, it still seems to fly in the face of the whole concept.

In 2019, the National Association of Realtors estimated that nationwide, the median purchase price for a first-time home was about $215,000. (We’re ignoring stats for 2020, because like most people we’d like to ignore everything about 2020. But in all seriousness, since it was such an atypical year it’s not a good reference point.)

Unsurprisingly, not a single home has sold for that sum in San Francisco in 2021 so far–not even a Below Market Rate unit. The cheapest 2021 sale to date in the city was $227,572.

Thus far we’ve had 161 SF home sales for the year that cost less than half a million; however, it would be hard to call them “starters” either, because almost all were BMR sales.

While subsidized housing is a great way to create opportunity for households that would otherwise never be able to afford it, the fact is it’s just too difficult to net such a home even if you have the money, so we can’t recommend such homes en masse–there just aren’t enough to go around.

One more thing worth noting is that the city does offer special BMR subsidies for first-time homebuyers, albeit with fairly reasonable income limits ($111,900 annually for one person). But you still have to win the housing lottery to make it happen.

The cheapest non-BMR home sold was actually a very affordable TIC at 1017 Kansas St that went for just $260,000 in July; this we’d have to qualify as a micro-home, since it was just 368 square feet in all, and as such also not a typical enough example to recommend as a starter, because only a handful of such places even exist. Classy staging, at least.

The cheapest non-BMR condo of 2021 sold over at 270 Valencia Street, listing for $495,000 and selling for $506,000 in April and also quite a small pad, measuring just under 500 square feet. This presumably, is the absolute floor for the city right now–both in terms of price and in terms of a home an average buyer might consider adequate.

Maybe the truth is that the “starter home” formula really doesn’t apply to a market like SF in this day and age–or maybe there are more homes waiting out there to resolve this dilemma that we haven’t seen yet?

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