I'll second Oakland. The cost of living is lower in terms of rent/housing and you can still be close to BART and lots of great parks, trails, and culture. From Oakland, you can work anywhere (just about) from Fremont to SF.
So if you lived in Oakland and your best job opportunity was in Santa Clara on Great America Parkway, what's the convenient way you'd get to work without a 45 minute car ride? Or for that matter Sunnyvale, or even Pleasanton?
There are obviously lots of good reasons to live in SF/bay, but transportation really doesn't seem like one of them. What am I missing?
Santa Clara is not anywhere along the "Fremont to SF" easy-access claim of drsnyder.
If you want to live in Oakland and don't like a 45-minute car commute, you don't take a job in Santa Clara or Sunnyvale.
Oakland to Pleasanton should be reasonable by BART.
The Bay Area can't compare to the USA's best train-centric cities (NY, Chicago, Boston) but beats most other domestic places for mass transit. Still, it's spotty, with some great corridors and some journeys that are really hard.
Fun historical factoid: LA used to have a world-class train system! Good luck with its public transport now, though... "I'd have to take 5 busses and it would take 3 hours? To get groceries?"
Unless you work in the East Bay, Oakland is a bad place to live for a hacker, simply because the commute to other parts of the bay is very inconvenient. My advice for people who don't know the area is: don't live in the east bay unless you also work in the east bay.
Most hacker jobs are in the south bay, followed by the peninsula and the city. The commute from the east bay to the south bay is painful, much more so than from the city to the south bay.
If you work in the city, you can take BART, but the convenience of BART depends on how close you live to a station. Berkeley/Oakland residential areas are much more spread out than SF. It isn't unlikely that the station is a 30 minute walk from your house.
When I lived in the east bay and worked in SOMA I had to walk 30 minutes to BART, then BART for about 30 minutes, then another 20 minute walk on the SF side. Now I live in the city and work in the same area of SOMA and I can get there in 15 minutes on the train or a 40 minute walk. I don't even want to talk about when I lived in the east bay and had to drive to Cupertino. What a driving nightmare...
In summary, Oakland is NOT a great hacker city unless you can do your hacking on that side of the bay...
There are obviously lots of good reasons to live in SF/bay, but transportation really doesn't seem like one of them. What am I missing?