Advice on selling my house or renting it out

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I am looking for some advice and/or opinions about selling my current primary residence or renting it out. My wife and I want to move closer to where we work (Sunnyvale, CA) to avoid a long commute and are debating whether we should sell out current house or rent it out. We live in San Jose, California and own a 3 BR 2 BA SFR (1140 sq. ft). These are the details about our house.

Purchase price: $855,000

Current approx value: 1,100,000

Current monthly mortgage payment: $3100 /month

Property taxes ~ $11,500 /yr

Rents in the area for a similar house: $3200 - $3400

Given the numbers, I understand that this would not qualify as a good rental property but given the crazy real estate market in the bay area we are worried we would not be able to purchase again should the market appreciate at the rate it has been in the past if we sell this house now and live in an apartment for a few years. Purchasing a property closer to work is out of the question for us right now because we cannot afford anything in Sunnyvale.