I don't think "royally screwed" is the phrase you are looking for. There may not be comparably nice homes for cheaper in the area near your wife's work, but there are millions living on < 150k near you.
And you have to define your terms here. What do you mean by "living"? If you mean, "able to feed themselves and live under a roof", that's not living, that's subsisting. I'm talking about being more than just a serf and actually making forward progress in life. Sure, the bartender at the insanely overpriced place a few blocks from us probably only makes $60k, but he also probably lives with a roommate in a tiny apartment, still owes money on a 7 year old car, has no assets, has no savings, has no health insurance, has no chance of retiring at ANY age.
At this point, I don't think there is anything within our current distance to her job (20 minutes) that A) we would be eligible for, and B) would be cheaper. I telecommute. If we both had to drive an hour to work, then we'd have to buy a second car and the increased transportation costs would certainly eclipse any savings in housing.
Mind you, an hour away in DC is 15 miles on a good day. There are people who work here for half of what we make, and they commute 2 hours to work every morning. I hope you're not suggesting that that is a livable scenario. "Well, it is for them." Maybe for them (I'd argue they are sending themselves to an early grave, but I digress), but not for society as a whole.
At that point, if we're living 2 hours away, we might as well be working for less where we lived. Thus my point: we can't live and work here for much less than we're already making.