Anonymous wrote:The question is what is a reasonable sized house to you? Houses in the bay area are smaller than houses in other parts of the country in general.
The next question is how far are you willing to commute, and do you have the sort of job where a little bit of regional geographical flexibility is necessary. For example, if your DH works in tech and getting a job in the peninsula in the future is not out of the question, the East Bay or Marin would not be a strategic place to live. Are you planning on looking for work too, and is your work geographically flexible and/or centered more in one region of the bay area? If both of you intend to work in SF, living in Marin or the East Bay would be fine. IMHO it's easier to find houses in East Bay and Marin suburbs in that price range than closer to SV that have decent schools.
East Bay: Berkeley and Albany sometimes have 3 bedroom houses in that price range (although be prepared to move fast and wave contigencies), El Cerrito/Kensington is a nice area for families although the schools historically are not as good (this is starting to change), Alameda, Castro Valley, Fremont. Over the hill there's Walnut Creek, Lafayette, and Moraga. Then a little further down there's Fremont.
Unfortunately, they don't anymore. We've been looking for a 3/2 for 2+ years at the $1-1.1Mish point and there's not much out there. (Plenty that gets listed, but not much closes in that range unless a lot of work is needed.) The market is finally starting to soften (though not much help for us since we also need to sell a house!) so it might get better by winter, but right now in the inner East Bay (Albany, Alameda, Berkeley, Oakland and El Cerrito neighborhoods with strong elementary schools [and even some without!]) most houses that get listed in the $800K-$1M range ultimately sell for well above that, and starter 2/1s are pushing $1M. It may be better farther out, though. I'd try Walnut Creek and Pleasant Hill, and maybe parts of Moraga if you don't need to be close in. Castro Valley is still doable at that price point for larger homes. Fremont not so much, since it's part of the catchment area for some tech companies' incentive programs. (But if you're moving for a tech job, check out what home buying supports they may offer.)
I'd also seriously consider renting first in the city you're considering--both to get a feel for neighborhoods and because I strongly suspect the CA housing market is headed towards a correction, or at least a flattening, in the next year or two. Speaking from experience, it's no fun to buy at the peak.