Buying a home in the Bay Area could be more traumatic financially than in high-priced Washington. But for the past two years, San Franciscans have been eager to buy.

Some, for instance, have been willing to pay such prices as $70 a square foot for moderately sized, contemporary houses built on "floating" concrete slabs on reclaimed land on a little island in Foster City. Foster City is a big community with lagoons in San Mateo County, the peninsula south of San Francisco. The average price on the reclaimed island, called Plum Island, is $140,000, the average lot is 2,100 feet square.

Only a few of the island's 73 frame houses are unsold after 19 months. "They were slightly above the market when we opened," said the Centex Homes project manager, Diane Hughes, who is buying one of the waterfront models herself. "Otherwise, we would have been sold out sooner. There's a lot of competition in the area, even among our other Foster City dwellings."

In San Francisco, which is a 45-minute commute from Foster City and other San Mateo communities just south of the airport, buying a house is another story.

"You have to understand that 70 percent of our intown people are tenants," said Raymond I. Brown, a residential sales executive for the big Coldwell Banker realty firm. "There's very little new construction inside the city limits."

But Brown, who is 30, married and the father of two, illustrates another segment of a costly housing market.

He and his wife bought a 1904-vintage, detached frame house in San Francisco for $218,000. They are living on the lower level while spending about $80,000 to redo the two upper levels (even raising the attic roof) into what will be a fairly spacious home. The Browns plan to rent the first floor for $700 a month.

Does that kind of a housing investment make economic sense?

"It does if you like to be near a park in the city (they live near Golden Gate Park in the Richmond district) and be able to walk to the office in 10 minutes rather than have a 45-minute drive," said Brown. "Besides, you have to look at the after-tax cost of interest money and also be aware that we have a need to create more housing. I have confidence in future appreciation."

In addition to being an investor in urban residential rehabilitation, this real estate executive also has strong feelings about the San Francisco rental market. He said he helped campaign against a rent freeze proposition in the recent election. The rent measure was defeated in San Francisco, Santa Cruz and Palo Alto but passed in Berkeley and Davis.

"It was a ease of telling tenants to trust their landlords to pass on tax savings from Proposition 13. Many of the city tenants are in small buildings where the landlord lives," Brown said. "We managed to convince a majority that good landlords will make improvements or give rebates without legal pressure. I lived in New York City and know that rent control doesn't work."

In Berkeley, however, a citizens group spokesman said that landlords would be required to return 80 percent of their tax savings to tenants. Rent reductions would average more than 10 percent for Berkeley's 20,000 tenants, he said.

Another San Francisco, Jeff Deland, 24, said that he shares a two-bedroom garden apartment that costs $385 a month with utilities included. He has a 25-minute drive to his trade association job in the city. His apartment was unaffected by any of the rent freeze votes.

"We have a pool and a pleasant way of life," he said. "I know some single people who are buying houses down on the peninsula for $100,000 or more but that's out of my range now."

Paying more than $100,000 isn't unusual in suburban areas. Statistics kept by the J.M. Taylor & Co. real estate firm in Burlingame show that the average prices of resold houses in Hillsborough, a wealthy community south of San Francisco, rose from $91,074 in 1971 to $283,753 in 1973. The biggest increases, 29 and 31 percent, occurred in 1976 and 1977. In the first eight months of this year, the upward surge has been 14 percent.

Yet there is also evidence of price cooling in the San Francisco area.

In Foster City, where the average price increased from $39,600 in 1971 to $97,017 in 1978, the increase in the first eight months of this year has been only 4 percent. The rate of appreciation though declining has been higher in San Mateo and Burlingame.

In addition to peninsula development, San Franciscans turn to the north, across Golden Gate bridge, to Marin County, also home of high prices.Prices tend to be lower in east bay communities and to the north, where land costs aren't as high.

Developers say that stiff land regulations and shortages of building sites contribute to high prices. One result is lots that are Smaller than usual.

A quarter-acre "views" lot in the secnic Tiburon area of Marim County recently sold for $150,000, according to Rena Cements, an executive with the local home building association.

But she said some cooling in the market can be expected in 1979 as the result of rising mortgage rates. CAPTION: Picture 1, At Plum Island in Foster City, Calif. the average house price is $140,000. Island is created from reclaimed land. By Fred English; Picture 2, The Sunset District of San Francisco, seen from Mt. Sutro. AP