What's the best place in the bay area to buy a home in terms of long-term ROI on a $500k budget?

Don't forget your $500,000 is actually worth two million if you can meet the debt to income ratio your bank expects. I think Pittsburg and Antioch show the lowest cost to value in the bay area. You can make close to 10% returns on your purchase, higher than that if you introduce financing. Figure out how much the monthly payments you would owe on say one million dollars, and make sure that number is 45% or less than your monthly income. That is your limit for borrowing. Pittsburg and Antioch have solid potential. There is a widening of the freeway in Antioch that will open up a traffic bottleneck. Bart is supposed to built passed Antioch as well. If you are in a hurry you can buy up to 3 homes for cash, 4 if you went dumpster diving.

First of all you need to consider and decide on the type of home you'd like to live in. There are many areas where over time I believe you will see appreciation however the real questions are 'Why' do you want to buy and 'What' type of lifestyle do you want to experience. For example if your looking for a traditional single family detached home with a yard I have a few places to recommend, but if your looking for more of an urban feel and high rise living then I would be recommending a completely different area. Also, are you planning on being a landlord or will you be living in the home. Please provide some detail so that I can give you some recommendations.

As of early 2016, there are not too many areas near the two largest cities in the Bay Area to purchase a property for 500k. Of the cities that I believe have long-term growth prospects, only Oakland and Union City routinely have homes being sold for under 500k. I personally would avoid Hayward, Richmond, Oakley, Pittsburg, Concord, Benicia, Vallejo and Brentwood simply because they are too far from the main engines of economic growth in the Bay Area. Due to the huge increases in home values recently, it may just be better to wait for the next downturn.