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updated 9/1/2006 3:01:57 PM ET 2006-09-01T19:01:57

Silicon Valley ranks last in an annual ranking of 12 U.S. technology hubs because of the region's notoriously high housing costs, traffic congestion, unemployment rate and other quality-of-life problems.

According to a survey by the Silicon Valley Leadership Group, the nation's top-ranked tech hub is North Carolina's Raleigh-Durham area, which enjoys relatively affordable housing and a thriving job market. The region also wins points for local kids' performance on eighth-grade math tests, as well as comparatively low sales taxes and affordable utility bills.

The No. 2 city is Seattle, home to thousands of well-paid technology professionals who work at Microsoft Corp., in suburban Redmond, Wash.

No. 3 was the greater Denver area, which despite a growing number of traffic jams and soaring housing prices is also home to many startups in the emerging alternative-energy niche.

San Jose-based SVLG ranked its home region last for the second straight year — a dubious distinction considering that last year's list didn't include expensive cities such as New York or those with struggling urban cores such as Philadelphia and Chicago, all of which finished higher than Silicon Valley this year.

"These results were a reality check on the challenges we all know we face here in the valley," said Carl Guardino, president and CEO of the group that represents more than 200 of regional, private sector employers. "There are seemingly intractable challenges we know won't change over a week or a year."

The valley — defined broadly as the region stretching from San Jose north to San Francisco and Berkeley, as well as suburbs such as Cupertino and Palo Alto — fared particularly poorly because of its expensive homes.

Only 14.9 percent of local homes are within the price range of individuals earning the median income, according to a National Association of Home Builders survey included in the SVLG study. Only New York and San Diego fared worse.

By contrast, 65.8 percent of homes in the North Carolina tech hub were considered within the reach of those earning the median income.

Despite its dismal finishing, the valley remained dominant in one key metric: It attracts nearly $8 billion per year in venture funding, four times more than its closest domestic rivals. That includes $1.6 billion venture funds to "clean technology" and alternative-energy companies.

Silicon Valley also is one of the few global tech hubs that dominate both the technology and life-sciences industries, putting it above international tech hubs such as Basel, Switzerland; Bangalore, India; Prague; Dublin; Berlin; Tokyo; and Shanghai. Only Singapore rivals Silicon Valley in both segments — but the concentration of venture capital and tech companies there is far smaller than in the valley, SVLG reported.

The "Projections 2007" report, which will be released in its entirety next Wednesday, does not attempt to calculate the impact of weather, cultural attractions, proximity to the ocean and mountains or other intangibles that seduce many to California. Guardino acknowledges that the study may be unduly harsh on his hometown.

"A certain number of people would rather be here than shoveling snow in the Northeast in the winter or swatting bugs in the South in the summer," Guardino said.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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