How much can I expect to spend on a new bike (casual riding)?

I'm in the market for a new bike. I don't like to call myself a beginner (just don't like the term), but I want it for the purpose of CASUAL biking. I am not a serious mountain biker or anything, and will not be doing any riding. Will primarily be riding to & from work, and around town for enjoyment/exercise. If it's worth anything, I live in San Francisco, so the landscape is rather hilly. A lot of my friends are what I would call "Bike ists", and don't think I can get even get a decent CASUAL bike for less than $1,000. I'd really rather not spend that much (preferably half). Can I get a decent bike for $500?