I had a 20 mile L.A. commute for a year, and I said never again. Living near work was my number one priority. I live two miles from work. This morning, I got a flat tire, so I just walked my bike the rest of the way. My wife works much less than I do, so it's a four mile ride for her. Church is less than two miles away. It takes minutes to walk to the grocery store.
When we were looking for a place to live, we were only willing to buy something that was comparable in price to renting, using a buy/rent comparison calculator. That put us in a less desirable neighborhood, but we were okay with that. The more "acceptable" neighborhoods would have cost about twice as much. We passed over some cheap options in a more ghetto area farther from work. The car-free thing was definitely a factor, but we were willing to buy a car for a sufficiently cheaper house. If we were any farther from friends and church, we would have bought a car from the start, and as it is, we'll probably get one soon anyway. The only nut we haven't cracked is schools, but I'm confident it will work out.
As for the bigger question of why don't we move out of this expensive city, we have some roots here now, and the other places that have jobs in my field are either just as expensive or very uninteresting. It would take a bigger salary for a more interesting job in a cheaper location, near family, with the ability to walk or bike to work, for me to consider moving. After I retire, the job issue would obviously go away, and we might move near family, since all of our family lives in cheaper areas.