Your questions shows your address as Novato, so don't know if you are visiting there or have already moved and maybe are renting now.
I sold a condominimium in Mill Valley earlier this year for $350,000 with 2 bedroom and 2 baths, about 1350 square feet with a water view and very nice neighborhood. It was a bank owned property, and there are not a lot of these "deals" at any given moment. In the past 12 months, if you were patient and diligent in looking and responding to possibilities quickly, you might have purchased a small home or condominium in Marin for $400,000 or less. But today there is low inventory, not as many bank owned properties and more competional among buyers, so its even more difficult. But, as we know, circumstances change and the market may have more bank properties and better deals and more inventory 6 months from now. There are no guarantees. But if you and your husband have a good down payment, good credit and are willing to work at this it's possible to succeed absolutely.
you say "in California" not , "in Marin". If you will be happy outside of Marin there are LOTS of homes under 400k that you would love. Best of luck to you and don't give up! maryann