If you don't have school age kids, you can get something in most parts of the bay for $3500, but the schools are very medicore (and probably terrible compared to most other parts of the east coast or midwest).
If you need good schools, bump your budget up to $4000-4500. You might find a deal somewhere, but it's rare.
When I first moved to the Menlo Park/Palo Alto area two years ago, rent on a decent two-bedroom apartment was around $1400-1700 per month. Currently (two years later roughly), it's $2350+ a month and still climbing.
In fairness, a lot of that has to do with Facebook moving into Menlo Park and the crazy demand for space in Palo Alto / proximity to Stanford University.
I'd move farther south, but there's too much urban sprawl which makes it inconvenient at best to get around unless you drive everywhere. Mountain View is going up too thanks to Google.
The last place of refuge is pretty much Sunnyvale and San Jose. But the rent there is still a few hundred higher per month at least than it was two years ago.
Honestly the quoted price sounds low to me for a single-family home in SF.
In the <Sunset>, you can get three bedrooms, two bathrooms, an attached garage and a big yard.
Not all neighborhoods are equal, presumably