why is Monterey so cheap?
Few high paying jobs in the immediate area?
The high paying jobs are all in San Jose, Mountain View, Menlo, Cupertino, SF, east Bay etc and the daily commute from Monterey and those areas would be horrible. Some people who work in Cupertino or south bay do live further southwest in Santa Cruz and commute but its painful. For Monterey I second Pacific Grove and Carmel. Carmel has very schools and the area is bigger. If you go inland, you'll find more people with families and kids, regular suburbs. PG is a beautiful beach town but you'll find lost of weekend traffic and travelers, retirees and locals without kids.
350K is fine. If you don't have any equity you may need to buy a smaller house but smaller houses are so much nicer in CA than the DMV. In the DMV the small homes really are ugly shit stacks. In CA, some of the prettiest houses that I've been in and seem are under 2000K feet and don't feel small. In many CA homes, you don't have rooms that you don't use often like an formal living room or separate formal dining room. There is generally less closet space taking up sq footage and fewer small rooms breaking up the house. The weather is nice year round so investing in nice patio furniture and a heater for evenings is a must and gives you an extra room that you'll use all the time.