203k is alive and well in San Francisco
Your first thought is the home prices in the "city" are way to high for FHA loans. Let's look at that. The maximum loan limit for a SFR is $1,089,300. So You are correct for the most part however. if you consider the 3.5% down the purchase price with ONLY 3.5% down would be covered up to $1,128,808.
I had a client who was capible of paying $1,500,000 all in cash but wanted to keep his cash flow available for his franchises. With a loan of $1,128,808 a purchase of $1,500,000 would require only a $371,192 down payment.
Be creative with your thinking, think out of the box, tell me what you can do on your next purchase or sale.