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You didn't mention square footage on either or the number of bedrooms and baths for #2.
Alot depends on how long you are planning to live there. If you're looking at long-term (more than 3 years or so), I'd say #1 is a place your baby could grow up in without much worry. The dogs have a small yard. No hauling them in and out alot as with #2 (believe me that can get old with larger dogs). Also.. #2 is upstairs.. you're dealing with a downstairs neighbor and that can be a pain if they complain about noise (dogs, baby as it gets older, etc).
Another thing to consider is what things cost in the suburb versus the city. Where I live things like gas, groceries, etc are all quite a bit cheaper a few miles outside of town than they are in Seattle itself.
Crime in the area would be another thing to consider. Schools also (again if you are thinking long term).
Ultimately you have to live there..not us.
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