Palo Alto Hackers - How do you afford to rent / buy in that area?

I live in the east bay & have been working from home for two years (Rails developer), just back from an afternoon drive around the leafy suburbs of Palo Alto as I've been considering getting a full time job in the area.

I'm kind of shell shocked at just how much rent costs, we currently pay $1600 for a one bedroom apartment within walking distance to the BART, gym, restaurants etc.. but in PA a similar place looks to be around $3.2k!! Buying looks even more insane, we seen a few old piles of soon to be ruble, disguised as homes, being flogged for upwards of $800k!

My salary expectations as a Rails developer, 29 years old, 8 years experience, 4 in a team lead role is about $110k, maybe $120k.....maybe this far to low for a "valley job"?

Just wondering how other technologies manage to live in this area - do you commute long distances OR is the typical salary far higher than what I'm considering?