I was with a friend looking out over the bay at the cliff bluffs outside my beachhouse. We were looking at the boats in the harbor with thier night lights shining (anchored for the night). We noticed what we thought was a boat with it's running lights on about 50-100 feet out on the water in front of us beyond the surf break. It was traveling parallel to the coastline, going towards the harbor boats. It looked like a patrol boat/coast guard going VERY slowly checking/patroling the area. We watched it, it was silent.. and being after midnight, we were the only ones out and there was no moon/clear conditions so it was dark. We could not really see the shape of the "craft" because of the darkness. As it moved toward the Capitola Village Beach.. the lights from the shore started to illuminate a slight shadow. It was then that we began to understand and see that this was NOT A BOAT but an aircraft. It began pulsating it's lights (Red on top, White beneath). It then began to slightly descend, and then ascend with vibration like movement. We cleary realized it was hovering just above the water... and then it began moving up and down verticaly UNLIKE ANY AIRCRAFT I HAVE EVER SEEN. It WAS NOT A HELICOPTER due to the silence. This is when I ran back into the beach house to locate binoculars. This took me about 3-4 minutes to complete. When I returned the craft had moved much farther and faster than its previous course across the bay and now it was about 500-100 feet above sea level heading over the horizon of the mountains soon to be out of sight due to the mountains blocking my view. I did witness it in the binoculars and IT WAS THE SAME CRAFT that had been within 50 feet of us about 15-20 minutes earlier. Now it was very far away and I still could not see an outline of shape even in my binoculars. But the lights were clear and never changed thier placement on the craft wherever that might have been. It disappeared out of sight as silently as it arrived. Wow.. my very first UFO sighting in my 47 years of life. I have been a believer but have never been a witness before tonight. Thanks for reading an interest in my sighting.