There are few places in California as coveted as the North Bay for its natural beauty and proximity to city, country and ocean. Naturally, there is a cost to being so well-located. Home prices in Sonoma County, for example, have risen so steadily over the past five years that the market is prohibitive to certain income levels. Those lucky or savvy enough to have bought in already are reaping financial gains reminiscent of the dotcom boom.

During the mid- to late-'90s, home buyers in Sonoma County could sign their escrow papers with the smug feeling that at least they weren't paying Marin County prices. But with the median home price in Sonoma County having reached $616,000 as of September, that smug bubble has burst, though the housing bubble has not. In fact, all signs point to California real estate as being among the most guaranteed investments a person can make, despite murmurs of things leveling off.

Where does this leave those with an appetite to own but who have shallow pockets? Here's a peek at some alternative paths toward home ownership.

I'll Gladly Pay You on Tuesday . . .

Since, according to the Bay Area census, the median income of Sonoma County households ranges from $50,000 to $63,000, where are people coming up with the money to buy these $616,000 homes? They're not, exact-ly.

"Sixty-five to 70 percent of all the loans I do are interest-only options," says Daniel Barwick of Benchmark Lending in Santa Rosa.

With interest-only loans, money paid monthly toward a mortgage does not reduce the principle owed, but it's a gamble that many new homeowners seem willing to take.

"The major benefit is that you have a lower monthly payment, which helps out with monthly cash flow," Barwick explains. "You'd think that only people who are financially strapped do this, but people who are fairly well-heeled do so too because they can invest the money they'd be paying on a mortgage in another form."

According to Barwick, many homeowners opt for these loans because they intend to sell their homes in three to four years and are banking on their property value to increase exponentially; often, it is the only way they can afford a mortgage.

Claudia Larson is a Rohnert Park singing teacher who bought her three-bedroom, two-bathroom condominium in 2004, where she had been renting since 2002.

"When I considered buying, I had no clue how I was going to afford a home in Sonoma County. It felt completely intangible and out of reach. I just decided to ask the manager of my condos if I could buy mine, and it turned out that it was for sale.

"The interest-only loan was the only way that I could get into home ownership, because I didn't have the funds for a large down payment. I have this strong need to feel as if I have an emotional investment in the land on which I'm living, and owning my home gives me that sense."

For people who really want to lower their monthly payments, Barwick also suggests deferred-interest loans. On that $600,000 home, a deferred-interest loan—in which the buyer only pays 1 percent of the interest—would bring the monthly mortgage payment down to $1,929 per month.

"Most people want the lowest payment possible, because they know their equity will grow," Barwick says. "I have some clients who actually live off the equity in their home. They refinance every three years and take out two to three hundred thousand and live on it."

Caveat emptor: These loans are not risk-proof. They tend to carry adjustable interest rates, and though payments may start out low, they can as much as double over time, since many of these loans shorten the payback time to accommodate the lowered payment. The worst-case scenario is that borrowers can end up owing more than they initially borrowed, especially if their equity does not appreciate as they had projected.

Sweating It Out

For many people, the prospect of a large down payment dulls the prospect of buying a home. Even a modest 5 percent down can add up to tens of thousands of dollars that many new buyers don't have.

The Santa Rosa-based Burbank Housing, a development and management nonprofit corporation, has run a program for new homeowners since the mid-'80s that provides between $30,000 and $40,000 in credit toward a new home. It's known as "mutual self-help housing." The catch? It requires buyers to participate in building their new homes.

"We give people a cash credit for the work they do. Their sweat equity is their down payment," says Chaney Delaire, Burbank's senior project manager, from her Santa Rosa office. "We ask that each qualifying household contributes 30 hours every week. It's a huge commitment of time for over 12 months. It brings their out-of-pocket expenses on closing to somewhere between $4,000 and $6,000."

The program helps buyers lock in the lowest possible financing. For its most current development, the Meadowlark estate in Forestville, buyers have received interest as low as 3 percent on 30-year fixed mortgages.

"We also bring in secondary financing in the form of loans, and often those types of loans offer reduced or deferred payments. This allows people to get into the homes and have a very affordable monthly mortgage program," Delaire says.

While not every new home buyer warms to the idea of strapping on a hard hat and putting up siding, for some it's worth the hard work.

Morini Harsono immigrated to the United States from Indonesia in 1998 with his wife and two young children. A clerk at a Safeway store in Santa Rosa, Harsono is part of Meadowlark's sweat-equity program. His wife is in school studying to become a CPA and is not currently working.

"I tried to buy a home before, but I couldn't afford to do it by myself," he says by phone. "This is a great opportunity, because I want to build my life here."

Harsono's home is being built on a 2,700-square-foot lot. The home itself will be 1,400 square feet, two stories with four bedrooms and two bathrooms.

Between his job, where he works 32 to 40 hours a week, and the 30 hours of committed work on the project, Harsono has little time for much else, but he isn't complaining.

"I'm so happy. Not only is this a great opportunity for us as a family, but I'm learning a lot of new things, because I've never done this before."

Delaire hears this type of sentiment a lot. "The buyers who participate in this program gain excellent skills, because we put them through a training program. We had a group of wives whose husbands had the traditional role of working during the day while they stayed home with their kids, and they helped on the houses. They told me they had no idea what an empowering experience this would be."

Since the mid-'80s, Burbank Housing has built more than 400 homes through this program in Windsor, Sonoma, Santa Rosa and even Napa County's Calistoga.

Art of Communing

Say the words "communal living" these days and most people wrinkle up their faces, imagining the original hippie communes of the '70s where living spaces and personal boundaries blurred. The word commune has been replaced by the terms "co-housing" and "intentional community," suggesting living spaces arranged with a common purpose and a sense of shared community, but with more definite boundaries and individual residences.

A year ago, Chris Paine, with his father Michael and his then-fiancée Kei Harris, bought 158 acres in Green Valley near Occidental with intentional community in mind.

"I have lived in shared housing throughout my life and enjoyed it, particularly because I like the qualities of personal growth and having very familiar friends handy," Paine says by phone from his home. "Personally, I've been very attracted to the quality and feeling of a group of people as a coordinated body that know each other well, make decisions together and are coordinated because of mutual respect and egalitarian ethics.

"Kei and I later married on the property, fulfilling our dream."

From this property purchase has sprung a group of likeminded people calling themselves Green Valley Village. The core group comprises five people with an extended group of more than 15 who function as a community living together as a subset of renters.

"The group is in the process of purchasing the other half of this historic extended family ranch, which is another 170 acres. We want to adapt the clustered homes and barn that are already on it," Paine says.

The barn will become the community center, allowing the individual homes to stay relatively quiet.

"A lot of people are looking at sharing a house because of this unconscious incentive the county has made for big houses," Paine says. "I predict that there will be a great many people finding an advantage to two families combining in a house. But people will have to squeeze themselves into current existing infrastructure, because the county zoning has unintentionally inhibited community-housing designs. It's designed on what I think of as a many-generations failed experiment in having the separate nuclear family promoted instead of larger family groups or communities."

FrogSong is the name of a relatively new co-housing development in Cotati begun in 1998 by a small group of people. Seven years later, FrogSong is a successful example.

In the two years since the development has been livable, only one member has sold out, and the sale was done internally, never going on the market.

The result is a 30-unit, custom-ordered neighborhood on two acres with two-, three- and four-bedroom homes built with radiant heating and energy-saving insulation, sustainable landscaping, a common house with a kitchen, top-of-the-line washers and dryers, guest rooms and a children's area. An internal system of pathways connects the residences to one another, and the homes all face away from the surrounding streets. Residents also have use of a workshop with a variety of tools and a room where classes and groups can be held.

Eris Weaver, a medical librarian, was part of the project from the very beginning. She lives in one of the smaller units, a two-bedroom, one-bathroom, which she purchased for market value at $225,000 in 1997 with 5 percent down.

"Co-housing isn't necessarily less expensive up front, and it involves a lot of time commitment to see it through, but the lifestyle benefits are significant. I live in a neighborhood where I know everybody. All my social needs are met right here. People with kids have shared childcare. We have a lot of shared resources. People borrow and lend cars, equipment, computers—you name it. We also have community meals three times a week, with a commitment to cook once a month, which is really great for working people who are tired at the end of the day," she says.

"There are a lot of ways that co-housing is more affordable in the long run," says Larkin Child, an herbalist raising two young daughters. "It enables people to afford a better life and a higher quality of living than if they were on their own." Child and her husband, Matthew Morgan, are a rare set of renters in FrogSong, who are only there for the year the owner will be gone.

There are other existing co-housing communities in the county that can serve as models and help curious people out, including Yulupa CoHousing in Santa Rosa and an older community called Two Acre Wood in Sebastopol.

Land Share

For people who desire more distinct privacy and don't long for the extra benefits of shared spaces, some buyers choose to enter into co-tenancy options. In these situations, owners jointly purchase property and share the cost of land but build or move into separate homes on the land with none or few shared facilities in common.

In 1997, Jenny Hudson and her then-husband found a 10-acre property with two houses on it on the Marin/Sonoma border.

"We loved it, but it was more than we could afford. I asked a friend of mine if he was interested in sharing the property, and he jumped at it. He became the third owner. His house was a granny-sized smaller house."

This kind of scenario is useful when the co-tenants know one another, as many of the properties, like Hudson's, are considered "undivided interest," meaning there are no property lines between the houses; the tenants must come to agreements about those decisions. In the eyes of the law, they are simply co-owners.

Hudson eventually divorced and bought out her ex-husband's share of the property, making her a two-thirds owner.

"We couldn't afford it alone initially, and it continues to be more affordable. It would still be too much on my own," she says.

Hudson is quick to offer advice to others who consider entering such an agreement.

"What I would tell someone going into this is, one, you really need to know who you're getting involved with; two, consult with a real estate attorney about issues that can come up when you sell the property—for example, whether you are reimbursed for improvements or you just accept that you have benefited from them."

Apt Condo Conv

For first-time home buyers who just want to build equity and get into the market, there is a unique and possibly temporary way to buy in under the median price of homes through apartments and condominium complexes that have been converted.

According to Gary Marsh, a real estate marketing consultant and the spokesman for Bella Oaks Condominiums in Santa Rosa, condominium rentals are suffering a decline. "Owners have had to give away rent concessions to attract tenants in many cases. In the current environment, it's been more economically beneficial for them to sell than rent," Marsh says.

Bella Oaks is a recent example. It opened as a rental community in 2003, but after suffering low rentals, the owners saw a "market opportunity for people to make a profit and help renters become homeowners at slightly more than their rents," Marsh says. "They took existing rental units, upgraded them and have begun selling the units in small releases."

In a price range of $299,000 to $412,000, well under the median, it's not surprising that the first units sold within weeks of going on the market.

"These are all market-rate homes, but by Sonoma County standards, they're reasonably affordable," says Marsh. "We say 'reasonably,' because affordable means different things to different people. But let's look at who gets priced out of the housing market: the teachers, policemen and other civic and civil employees who live here. The Bella Oaks price range means that these kinds of professionals can afford to live in the communities where they work.

"Some 600-plus apartment units are being considered or are in the process of conversion to for-sale condominiums in Sonoma County right now."

Another round of 10 to 12 of the condominiums at Bella Oaks will go up for sale in 2006.

"We think Bella Oaks will be sold-out by next year," he concludes.

Small, Really Small

Three really is a crowd inside of one of Jay Shafer's Tumbleweed Tiny Homes. On average, these homes range from 70 to 250 square feet, though Shafer has built them as large as 750 square feet, which he considers "palatial." The home Shafer lives in—the second one he ever built—parked on rural country property out in Occidental, is 70 square feet, smaller than the average guest bathroom. Inside this diminutive space he has managed to accommodate all of a person's basic needs: a composting toilet, shower and sink as well as heating, a loft bed, dorm-sized refrigerator, hot plate desk, closets and sitting area. Many of his houses are built with small front porches large enough to prop a chair on.

"I like to say that a well-designed little house is just a big house with all the unnecessary parts cut out," Shafer smiles.

"When people have too much stuff in their lives and too much space that needs heating or cleaning, I think that anything not contributing to their happiness is detracting from it and becomes a liability."

Shafer is a former art student and self-taught carpenter who hails from Iowa, where he got the idea for these tiny homes in 1999 when he found that the Airstream trailer he lived in was too difficult to insulate through an Iowa winter. Instead, he built himself a tiny house on the trailer's scale. "I wanted it to be cute enough that I could put it into anybody's yard and nobody would care," he says. "People have a disdain for small houses because they fear they'll lower property values."

His idea caught on quickly, and he began to take orders, building about two a year. In the five months since he's been in California, he's built as many as he did in the four years since he began.

"I moved out here partly because this was where most of my orders were coming from, and partly because I knew the area contained likeminded people who were already aware of sustainability issues and green building.

"I admit that this size isn't for everyone, but I hope that by showing one extreme, people might think of a middle ground between 70 and 4,000 square feet. I personally never made the connection between luxury and a big house. I grew up in a 4,000-square-foot home where we only used half the rooms but cleaned all of them. We also couldn't heat it adequately. I felt that my friends with smaller, cozier homes were luckier."

His dream, he says, is to build small communities of these homes on lots, with pedestrian walkways and parking in back.

"People are being forced to buy houses way outside of their means because there are few alternatives," he says. "Who wants to be in debt for 30 years or spend a lifetime making house payments? I paid for my house as I built it on a very modest income."

The cost of a 70-square-foot home like the one Shafer lives in goes for $30,000. He also sells plans for do-it-yourself kits for $680.

Outta Here

Poet Patti Trimble found an unusual alternative to home ownership in the Bay Area: She bought in Italy instead. But hers is no villa overlooking the sparkling Mediterranean, just a modest flat in Sicily in a stone building on an ancient Greek street too narrow for cars.

"I make a decent and steady living as a freelance writer, but I have no retirement and no great investments," Trimble says. "When I divorced two years ago, I got a small chunk of money from the sale of my Sebastopol house and was terrified it would disappear. I teach in Sicily part-time and have a small, wonderful community there, so I bought an apartment there. I wanted to put my money someplace safe. It cost about $90,000 U.S. dollars, and it is paid for in full, which means if I am ever really broke, I can go live there and write, teach at the university and live on very little."

As charming as the idea sounds to anyone still struggling to obtain a starter home, Trimble does not consider this a solution as much as her only alternative.

"I was born in Marin and think of Sonoma County as my home. I can't imagine being an expatriate year-round. It seems somewhat unreal that I can't stay here, but as a poet, and really an artist my entire life, I can't imagine paying a $2,000 to $3,000 mortgage during my last 20 years of great energy and creativity. This gives me great sadness. I was a naturalist for Pt. Reyes years ago and so much of my writing comes from the land here, is integrated here and born of it."

She shakes her head. "Never being able to settle here is devastating."

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