Yep, we live in an area with a very high cost of living. This SF Gate article talks about rental prices and why they're so high. $2500 is more than a mortgage payments in some places... and that's about what a small apartment in the city goes for. (I hear it's worse in Manhattan, but I live here.)
And that is why 3 people live in my one-bedroom apartment. And we got lucky, at that. The rent here's below the average -- and they allow cats.