San Francisco real estate heats up in 2013, renting may be only affordable option

The kind folks over at Redfin have a post up predicting the hottest neighborhoods nationwide for 2013 and – surprise surprise! – the Bay Area is right in the thick of things. Take a close look at those numbers for our own Mission District: that’s not a typo, the neighborhood median price is up 80% year-to-year.

The other two Bay Area entries on the list are not surprising. Willow Glen is where you go to live if you work in the South Bay and have a family – it’s located conveniently between the Almaden Valley and Downtown San Jose, has a homey feel, and has long held appeal for white collar workers ready to set down roots. Livermore seems over the hill and far away, but for younger families priced out of the city it marks a workable compromise between affordability, good school districts, and an acceptable commute.

What does this mean for the average would-be Bay Area buyer? Probably bad news, as these numbers are a sign that the boat may have sailed from the few remaining affordable and appealing neighborhoods in the Bay Area. The only reason that a half-dozen other SF neighborhoods aren’t on the list is supply: San Francisco is still coping with record low levels of available housing, forcing those who come to the city to work to look elsewhere for a place to live.

What does this mean for renters? Frustrated homebuyers will almost certainly trickle down into the rental market. If that trickle turns into a downpour, expect the usual dominoes to fall: vanishing selection, rising prices, and fierce competition. Rents in San Francisco do not have much room to go higher: even well-moneyed tech workers are experiencing sticker shock when pricing units in the Mission, Castro, Marina, and other in-demand neighborhoods.

So renting might be the only option for most people, but prices for 2013 might not make it a tremendously comfortable option. Not to mention that searching for a suitable place could take longer than ever. There’s some help on the way: micro-apartments, a handful of new developments, and conversion of some housing into condos offer a modicum of relief. But the bottom line is that 2013 is not going to be any easier for renters in San Francisco than 2012 was. Be patient, be thorough, and be ready to jump when the opportunity arises.