As someone who recently went from a ~50+ minute commute to a six minute commute (door to door) it’s worth it, that alone makes it worth it. That's the most valuable factor in the entire equation. I got ~+10 hours a week of my life back that I used to spend in a car. Ten. The amount of *life* I've regained, and its corresponding value, is incalculable. It's worth much more than an extra 7K/year - I'd consider the extra money as a nice bonus, the real value in this job offer is in the amount of your life you're going to get back.
The vast number of other /.’rs are right, we’re talking about companies, where there is no such thing as loyalty or friends *especially* between upper management and worker bees. It’s about money and greed. Period. Full stop. If they have two trained jr. developers who combined make less than you (in all forms of compensation: vacation time, medical/pension and other employer contributions, etc) then they will, in all likelihood, fire you as soon as they think those two can hold that ship afloat with the outsourced developers. I’d expect that to happen shortly after the product is launched. Unless you have shares in the company or will make beans should the product you’ve been working on takes off, then you have no stake in their game. If they really need you, they'll pay to keep you - but if they do, I think it will increase the likelihood that you're training your replacements - but are you absolutely sure you aren't already doing that?
UconnGuy is 100% right about how to tell if they truly are your friends or not when you tell them about the offer. If they really are “friends”, they’ll want you to get an extra $7k/year and +~10 hours a week of your life back, as friends want what's best for you not what's best for the company. XxtraLarGe also has a very good suggestion, you can offer to stay on as a consultant. It could be for a transitional period or as long as you/they want, and with the extra ~+10 hours a week, you’re going to have *plenty* of time to do that consulting work!
Take the new job as long as you have some level of confidence that it’s a stable move and your new employer isn’t at risk for downsizing anytime soon as you’ll be the first to go if they do. Bottom line is this: time is something they’re always making more of but something you’ll never have enough of & the amount of *life* you’ll get back that you used to spend commuting will be worth infinitely more than the $7k pay rise is.