Thanks to all for the quick feedback! Some questions and points were raised, so I'll add more info to my run down.
My current rental situation is fairly unheard of in the DC area. My rent is $1037/month for a 2 bed room apartment, utilities are about $160/month. The only reason I pay this rent is because a few years ago my high credit score qualified me for a below average rate, the apartment complex was running a special. The complex is in Greenbelt, MD and it's largely section 8 housing. The leasing rep I was working with was shocked that someone actually qualified for the low rate at the time. Today a 1 bedroom in the same complex rents for $1600/month. There is a fair amount of crime in this area and my wife doesn't always feel safe. We try to mitigate this by me picking her up/dropping her off at the metro station even though it is less than 1 mile away, etc. I appreciate the advice to spend a couple hundred dollars more per month in a nicer area, I hadn't considered that. However, a 2 bedroom in a nicer area like Silver Spring, MD costs $2000/month. In DC my friends all pay $2500/month or more. Does that advice hold true if the jump in rent is that much?
I'm also at zero risk of losing my job. I sell insurance in my family agency and I work on straight commission. My customer base belongs to me so I actually can't be fired unless I do something illegal (and I have nothing planned there). Starting my career in this business 8 years ago was very tough, I made almost no money in the beginning. But my residual income has finally been built up to a point when I'm comfortable, my commission has grown at $5k per year (this year $10k!). I suppose I could be at risk of losing a lot more clients than normal in a given year, but by and large insurance is a very stable profession.
I have $0 saved for retirement, although we both have indexed universal life insurance that builds cash value and disability policies with "full return of premium riders". When we reach retirement age, The IUL policies will be worth about $200k each, the disability policies can be cashed in for about $25k each. I'm 30 and my wife is 26. The combination of her student loans, my above mentioned work history and the fact that we paid for our wedding ourselves didn't allow us to think long term before. My wife has a 401k that she can contribute to at work, but we thought it might make more sense to get rid of the student loans before doing that.
A last factor that might make a difference is if we bought a house our mortgage would be $1400/month. Of that, less than $1000 would be interest.