MacOS – Python Virtualenv is broken since upgrading to OS X Mountain Lion

Since upgrading to Mountain Lion, when running the command "virtualenv env", I get:

New python executable in env/bin/python
Installing setuptools.........
  Complete output from command /Users/agoodattitude...ncode/env/bin/python -c "#!python
\"\"\"Bootstra...sys.argv[1:])

" /Library/Python/2.7/...ols-0.6c11-py2.7.egg:
  Processing setuptools-0.6c11-py2.7.egg
Removing /Library/Python/2.7/site-packages/setuptools-0.6c11-py2.7.egg
Copying setuptools-0.6c11-py2.7.egg to /Library/Python/2.7/site-packages
setuptools 0.6c11 is already the active version in easy-install.pth
Installing easy_install script to /usr/local/bin
error: /usr/local/bin/easy_install: Permission denied
----------------------------------------
...Installing setuptools...done.
Traceback (most recent call last):
  File "/usr/local/bin/virtualenv", line 9, in <module>
    load_entry_point('virtualenv==1.7.2', 'console_scripts', 'virtualenv')()
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 942, in main
    never_download=options.never_download)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 1052, in create_environment
    search_dirs=search_dirs, never_download=never_download)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 598, in install_setuptools
    search_dirs=search_dirs, never_download=never_download)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 570, in _install_req
    cwd=cwd)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 1020, in call_subprocess
    % (cmd_desc, proc.returncode))
OSError: Command /Users/agoodattitude...xxxxx/env/bin/python -c "#!python
\"\"\"Bootstra...sys.argv[1:])

" /Library/Python/2.7/...ols-0.6c11-py2.7.egg failed with error code 1

Any ideas?

Edit: I now get:

New python executable in env/bin/python
Installing setuptools.............done.
Installing pip....
  Complete output from command /Users/agoodattitude...ncode/env/bin/python -x /Users/agoodattitude...env/bin/easy_install /Library/Python/2.7/...pport/pip-1.1.tar.gz:
  /Users/agoodattitude/saff-py/xxxxxx/env/bin/python: can't open file '/Users/agoodattitude/saff-py/xxxxx/env/bin/easy_install': [Errno 2] No such file or directory
----------------------------------------
...Installing pip...done.
Traceback (most recent call last):
  File "/usr/local/bin/virtualenv", line 9, in <module>
    load_entry_point('virtualenv==1.7.2', 'console_scripts', 'virtualenv')()
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 942, in main
    never_download=options.never_download)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 1054, in create_environment
    install_pip(py_executable, search_dirs=search_dirs, never_download=never_download)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 654, in install_pip
    filter_stdout=_filter_setup)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 1020, in call_subprocess
    % (cmd_desc, proc.returncode))
OSError: Command /Users/agoodattitude...xxxx/env/bin/python -x /Users/agoodattitude...env/bin/easy_install /Library/Python/2.7/...pport/pip-1.1.tar.gz failed with error code 2

More messages:

>>> sudo virtualenv -vvv env
Password:
Creating env/lib/python2.7
Symlinking Python bootstrap modules
  Symlinking env/lib/python2.7/config
  Symlinking env/lib/python2.7/lib-dynload
  Symlinking env/lib/python2.7/os.py
  Ignoring built-in bootstrap module: posix
  Symlinking env/lib/python2.7/posixpath.py
  Cannot import bootstrap module: nt
  Symlinking env/lib/python2.7/ntpath.py
  Symlinking env/lib/python2.7/genericpath.py
  Symlinking env/lib/python2.7/fnmatch.py
  Symlinking env/lib/python2.7/locale.py
  Symlinking env/lib/python2.7/encodings
  Symlinking env/lib/python2.7/codecs.py
  Symlinking env/lib/python2.7/stat.py
  Symlinking env/lib/python2.7/UserDict.py
  File env/lib/python2.7/lib-dynload/readline.so already exists
  Symlinking env/lib/python2.7/copy_reg.py
  Symlinking env/lib/python2.7/types.py
  Symlinking env/lib/python2.7/re.py
  Symlinking env/lib/python2.7/sre.py
  Symlinking env/lib/python2.7/sre_parse.py
  Symlinking env/lib/python2.7/sre_constants.py
  Symlinking env/lib/python2.7/sre_compile.py
  File env/lib/python2.7/lib-dynload/zlib.so already exists
  Symlinking env/lib/python2.7/warnings.py
  Symlinking env/lib/python2.7/linecache.py
  Symlinking env/lib/python2.7/_abcoll.py
  Symlinking env/lib/python2.7/abc.py
  Symlinking env/lib/python2.7/_weakrefset.py
Creating env/lib/python2.7/site-packages
Writing env/lib/python2.7/site.py
Writing env/lib/python2.7/orig-prefix.txt
Writing env/lib/python2.7/no-global-site-packages.txt
Creating parent directories for env/include
Symlinking env/include/python2.7
Creating env/bin
New python executable in env/bin/python
Changed mode of env/bin/python to 0755
MacOSX Python framework detected
Symlinking env/.Python
Testing executable with env/bin/python -c "import sys;out=sys.stdout;getattr(out, "buffer", out).write(sys.prefix.encode("utf-8"))"
Got sys.prefix result: u'/Users/agoodattitude/saff-py/sdfsd/env'
Creating env/lib/python2.7/distutils
Writing env/lib/python2.7/distutils/__init__.py
Writing env/lib/python2.7/distutils/distutils.cfg
Using existing setuptools egg: /Library/Python/2.7/site-packages/virtualenv_support/setuptools-0.6c11-py2.7.egg
Installing setuptools...
  Running command /Users/agoodattitude...dfdf/env/bin/python -c "#!python
\"\"\"Bootstra...sys.argv[1:])

" -v /Library/Python/2.7/...ols-0.6c11-py2.7.egg
  Processing setuptools-0.6c11-py2.7.egg
  Removing /Library/Python/2.7/site-packages/setuptools-0.6c11-py2.7.egg
  Copying setuptools-0.6c11-py2.7.egg to /Library/Python/2.7/site-packages
  setuptools 0.6c11 is already the active version in easy-install.pth
  Installing easy_install script to /usr/local/bin
  changing mode of /usr/local/bin/easy_install to 755
  Installing easy_install-2.7 script to /usr/local/bin
  changing mode of /usr/local/bin/easy_install-2.7 to 755

  Installed /Library/Python/2.7/site-packages/setuptools-0.6c11-py2.7.egg
  Processing dependencies for setuptools==0.6c11
  Finished processing dependencies for setuptools==0.6c11
...Installing setuptools...done.
Installing existing pip-1.1.tar.gz distribution: /Library/Python/2.7/site-packages/virtualenv_support/pip-1.1.tar.gz
Installing pip...
  Running command /Users/agoodattitude...dfdf/env/bin/python -x /Users/agoodattitude...env/bin/easy_install /Library/Python/2.7/...pport/pip-1.1.tar.gz
  /Users/agoodattitude/saff-py/sdfsdf/env/bin/python: can't open file '/Users/agoodattitude/saff-py/sdencode/env/bin/easy_install': [Errno 2] No such file or directory
  Complete output from command /Users/agoodattitude...dfdf/env/bin/python -x /Users/agoodattitude...env/bin/easy_install /Library/Python/2.7/...pport/pip-1.1.tar.gz:
  /Users/agoodattitude/saff-py/sdfsdf/env/bin/python: can't open file '/Users/agoodattitude/saff-py/sdfsdf/env/bin/easy_install': [Errno 2] No such file or directory
----------------------------------------
...Installing pip...done.
Traceback (most recent call last):
  File "/usr/local/bin/virtualenv", line 9, in <module>
    load_entry_point('virtualenv==1.7.2', 'console_scripts', 'virtualenv')()
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 942, in main
    never_download=options.never_download)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 1054, in create_environment
    install_pip(py_executable, search_dirs=search_dirs, never_download=never_download)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 654, in install_pip
    filter_stdout=_filter_setup)
  File "/Library/Python/2.7/site-packages/virtualenv.py", line 1020, in call_subprocess
    % (cmd_desc, proc.returncode))
OSError: Command /Users/agoodattitude...dfdfdf/env/bin/python -x /Users/agoodattitude...env/bin/easy_install /Library/Python/2.7/...pport/pip-1.1.tar.gz failed with error code 2