> rents, at least in the Bay area, are 1/3 to 1/4 the price of a
> comparable house.
Let's check that math a little. Here's a few comparables:
http://sfbay.craigslist.org/eby/apa/402050036.html = $2300/mo http://dianeverducci.idxre.com/idx/detail.cfm?cid=251&bid=1&pid=40272718 = $575k
$575k is $115k down (presume 20%) and a 30yr 6.25% mortgage for $460k is $2833/mo of which about $28,500 in the first year is interest. 1.3% is about right for Berkeley taxes, so that's about $7500/yr. That makes a $36k deduction, which is about a $12k tax break (presume $100k income). Final tally: about $2000/mo. That presumes you have the $115k down and don't mind making "principal payments" (which has a zero sum impact on equity). If you finance the whole thing (good luck in this environment), the interest is more like $35,700/yr giving you an $14.5k tax break (on $43,200 deduction) or a net of $2400/mo.
There's lots of things in here that I don't account for: maintenance, for one. But: buying in the Bay Area is still competitive with rents.
If you can rent a $600k house for $600/mo, you're way ahead of the crowd.
/jordan