A $900k newly constructed house in San Jose probably isn't much of a house - more likely a townhouse with no common walls. Most of these are in adequate but not the very best school districts. Looking at mlslistings.com, $600-$700k is going to be a huge downgrade. Schools will be a big problem, as will the size of the house and probably the commute. When the market turns, it's the marginal areas that suffer the most. They get run up in price by folks in your position when the market is hot, but have little appeal when buyers can afford better neighborhoods.
Getting a traditional house in a good school district looks like around $750k to start. That will get you a small house in Cambrian or Evergreen, the areas with the best schools for your housing dollar. Renting a house in these same areas would be $3,500 to $4,000 a month, not much better and you lose the tax benefits and any appreciation. If you are happy with the design, yard area, commute, and the schools where you are, I would not make a change.