Can't afford to buy a home in San Francisco?

Published: Nov 27, 2016 8:32 a.m. ET

[Market Watch] While half a million dollars might buy you a mansion in much of the U.S., in San Francisco it won’t even buy you a studio apartment.

That’s the latest analysis from Polaris Pacific, a Los Angeles real-estate research firm that focuses on West Coast markets. Despite some recent softening at the top of the market in San Francisco, even buyers who could afford a $500,000 mortgage (a $2,300 monthly payment, including property taxes and insurance) won’t find many one-bedroom condominium units in the city, let alone a single-family house.

For example, in San Francisco, where the median home value is now $1.1 million, up 3.2% in the past year, a $500,000 purchase price would only get you a 400-square-foot apartment, Polaris notes, most likely a studio or tiny one-bedroom unit at best. Inventory in San Francisco is tight, too, with just 3½ months’ worth of supply, the company said.

By comparison, the median home value in August 2016 in all of the U.S. was $284,000, according to the latest U.S. Census figures.

And fast-growing Oakland, across the bay from San Francisco, which is now home to companies like Pandora and Uber, has seen prices rise by more than 9% in the past year. The median home price in Oakland is just over $531,000. A $500,000 purchase would net you a 978-square-foot home, Polaris says.

And you would have to move fast to land place in Oakland. Inventory of homes at the median value have just a 1.2-month supply, which means homes on the market at that price range would sell out in a little over 30 days, according to Polaris. (By comparison, a more normal inventory level in most markets is about four to six months’ worth of supply, according to Realtors.)

So where else can you look in the Bay Area for a home that doesn’t break the bank and is reasonably well-located? (Bay Area homeowners do get a break as the conforming loan limit for FHA, Fannie FNMA, +0.00% and Freddie Mac FMCC, +0.66% mortgage loans is higher than the more common $417,000 limit and instead goes up to $625,500, which means banks won’t require a whopping 20% down payments in most cases.)

Below are some cities in view of San Francisco and close to public transportation. Still, you’ll need to hustle. “These were once secondary, tertiary markets,” said Paul Zeger, the San Francisco-based chief executive of Polaris Pacific. “Now they are increasingly the first to go.”

During World War II, thousands of blue-collar ship workers who built Liberty ships at the Kaiser Shipyards lived here. 70 years later, Richmond is still struggling with post-industrial blight and crime, but it’s still a city on the Bay, and that makes it a growing destination for younger home buyers who will trade looking out the window at a giant Chevron CHV, +0.67%   refinery for an affordable single family home that’s close to BART trains and both the 580 and 880 freeways. For example, SunPower Systems, a unit of SunPower Corp. SPWR, +1.42%   makes its home in a former Ford Motor Co. F, -1.00%   assembly plant on the waterfront. The median home price in Richmond is a relatively cheap $406,000, while San Pablo is even cheaper at $375,000.

While Oakland is still technically home to the NFL’s Raiders, the largest number of Raiders fans actually resides in the blue-collar cities that were once home to a Chevrolet GM, -0.58%   auto plant (San Leandro) and other manufacturing jobs. Foreclosures during the housing crash hit hard here, but the cities have been repurposed as a tech hub and still retain a popular waterfront marina to the Bay — plus access to BART and Amtrak and the 580 and 880 freeways. The median home price for Newark: $494,250 (up 14.2% in the past year). A $500,000 home in Newark would also be breathable, at 1,189 square feet, according to Polaris. The median home price in Hayward is $448,000, according to Polaris, but up nearly 20% in the past year. The median home price in San Leandro is $551,900, and rising fast, up 9.2% in the past year.

Once a gritty industrial suburb of Oakland and Berkeley, Emeryville is now the home of Pixar Studios, which is owned by Disney DIS, +0.15% LeapFrog Enterprises, which makes educational games and Novartis International AG NVS, -0.72% subsidiary Chiron. Not only does it boast a waterfront, but it’s also home to Amtrak’s Capitol Corridor service that runs to San Jose and Sacramento, and it’s a short drive to San Francisco across the Bay Bridge. It’s also close to the University of California at Berkeley and Oakland’s emerging tech scene. Even here, the median price is $561,381, up a whopping 18% in the past year. Square footage for a $500,000 foot home is cozy though at 930 square feet.

The City of San Francisco’s southern neighbor, Daly City, still has the spirit of the Old West, hosting a rodeo and horse show ever year at the giant Cow Palace. Daly City is right on the BART line to the airport and downtown, and the tiny homes that are often bunched together are still a bargain compared with driving down the peninsula to closer to more expensive Silicon Valley homes. (Palo Alto’s median home price is now $1.5 million, while Mountain View’s is $1.1 million, Polaris notes.) Daly City is also on Muni’s bus and trolley lines and is close to the 280 freeway and Highway 101. It’s also near the Pacific Ocean, though Daly City residents complain about the near constant fog and cold, compared with the rest of Bay. The median home price is $561,625, down 1% in the past year, with a home of that price range yielding a square footage of about 980 feet.