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I'm in the IT field as well, and I'd avoid contract. I did that for around a year and a half right after college until I got a permanent position at another company. It sucked hoping that I'd get renewed for another 6 months when the contract was close to ending. In my case, the people I worked for loved my work ethic and skill, but the state agency I was contracted for was very bad at managing money, so the uncertainty of renewal was always there.
The second position sounds more promising and a better place to work, but you have to decide if the location where you currently live is important enough to you to stay and keep looking.
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"Yeah, but your scientists were so preoccupied with whether or not they could, they didn't stop to think if they should."
-Dr. Ian Malcolm, Jurassic Park
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