Alternatives to Walnut Creek? (San Francisco: real estate, foreclosures, rental)

[jkfe]

My husband was just given the opportunity to relocate with his company from our current home in a suburub of Milwaukee, Wisconsin, to San Francisco. We've asked his colleagues for housing advice and have also done extensive reading in the SF forum here (thanks for everyone who takes the time to write such insightful posts!), and from what we can tell so far, a suburb like Walnut Creek appears to be the closest thing to what we are looking for. Excellent schools, safety, removed from the city (but still accessible by BART), and a mix of independent business and commercial businesses to allow for both a small-town feeling as well as bigger city convenience. (Remember, I'm generalizing from halfway across the country here based on what I've seen and read online, so I know we'll have to get a real sense of the place by visiting first).

Our problem is the cost factor. We searched on [URL="http://www.realtor.com"]www.realtor.com[/URL] in Walnut Creek, and could not find a home that resembles the one we currently live in for less than $600K. (If you are curious to see a home in Walnut Creek that resembles our current home outside of Milwaukee, go to [URL="http://www.realtor.com"]www.realtor.com[/URL], and type in MLS #40423970. Our home is actually one bedroom and 500 sq feet bigger, with a 0.5 acre wooded yard, but the layout, amenities, and look and feel are much the same). I'll be honest - -the Walnut Creek home is more than double what we paid for our current one. While the exact terms of my husband's promotion/cost of living adjustment are still being worked out, we know his salary won't be doubled. So, here are my questions:

1. Are there other suburbs that are comparable to Walnut Creek in their offerings, but more affordable? (We'd be more comfortable in the $400K-$450K range than $600-$650K). Or is real estate out in this area generally this pricey for a family home with great schools? (Note: We'd be willing to move farther from SF, but not likely closer to it. We've owned a home in a more urban/edgy neighborhood in the past, and weren't comfortable in that type of area once we had small children).
2. For others who have relocated from a smaller market to a more expensive one, how do employers handle the enormous increase in cost of living? (Some web calculators have estimated a 200% increase in cost of living from our current suburb to some of those outside SF). Surely companies don't just dole out 50%-100% salary increases. But if they don't, how can you be expected to afford housing? Is it common for relocating families to rent homes or live in condos?
3. I've read of the popularity of interest-only home loans in expensive markets, but the concept terrifies me. I've lived in Wisconsin my whole life, and everyone I know purchases their home with the intention of either building equity to put towards a bigger and better home in the future, or with the intention of living in their home for the remainder of their lives, paying it off and owning it outright. Are interest-only loans more common in the SF area where housing is so much more expensive?

Any feedback you'd have is appreciated, and if any of this was covered in other threads, feel free to direct me to them. We're just trying to get our footing here as we're obviously out of our element.

[clongirl]

My only feedback would be to rent rather than buy.

You need ask yourselves if it's worth it to move to a not so nice area with questionable schools just so you can own a house.

Housing costs are very high here and it's acceptable, common, and in most cases better to rent. You can get a gorgeous house in a great area with excellent schools for less than it is to purchase. It's just a fact of life here in the Bay Area. It's all about the compromise and priority.

[jkfe]

Thanks for that feedback - - I would not have guessed renting was so commonplace, and we're certainly not opposed to it. Can you suggest an online resource that has rental listings? I know on realtor.com you can search by either, "Buy" or "Rent," but I thought perhaps there was a more local website that would be helpful to check out for rental properties.

[clongirl]

Yeah, the only people that can afford to purchase houses in nice areas with good schools are the wealthy (or sold their houses during the peak of the housing bubble). All the other home owners here had purchased their houses prior to the mid 1990's, before the run up in prices..or are now underwater with their mortgages or foreclosed upon altogether.

Craigslist is the best resource in these parts. Good luck!

[PeixeGato]

I'm not sure I'd be looking to buy right now anyway, especially if you are moving from a long distance and you aren't really familiar with the area. Banks have a LOT of foreclosures on their books (including homes they have put on the market and those they have held off the market to prevent flooding the market with inventory) and from things I read, there are a lot of homes that have either had a Notice of Default filed and issued but the bank is dragging its feet indefinitely on completing the foreclosure process or homes that are 1-3 months behind on their mortgage and on the brink of getting the Notice of Default filed.

In other words, the storm is not yet over. Rather, it feels like we're in the eye of a hurricane right now.