Really?
A $36,000 deduction on $100,000 of taxable income is worth $12,000 only for those who are married filing separately. Otherwise, the marginal rates are 28% for single filers and 25% for everyone else. To get to the 33% bracket for married filing jointly, taxable income would need to be $188,450; to get there filing singly, taxable income would need to be $154,800. (These are for taxable income; for adjusted gross income, the marginal rates are lower. And the alt min tax would limit marginal rates to 26% at most.)
If we assume a 28% marginal rate and we assume that our renter were already itemizing deductions (or had enough deductions so that the standard deduction versus itemizing were a wash), then the tax benefit of the property taxes and mortgage interest would be $36,000 * 28% = $10,080, versus outlays of $34,000 for mortgage payments and $7,500 for RE taxes. Even without property insurance, we get $41,500 per year or about $2,600 per month. That's $600 more per month than renting.
But remember that the buyer put $115,000 down. If the renter had that kind of cash lying around, she could park it in short-term investments and earn 5% interest (be sure not to buy CDOs, of course). That's $5,750 per year even without compounding--subtracting $1,610 for federal taxes and $385 for state taxes (9.3% less the federal deduction) leaves $3,750 as the annual opportunity cost, or just over $300 per month.
So, for someone with roughly $100,000 in taxable income, in your example, buying is $900 more expensive than renting. I would not call that competitive unless you think the Devil Rays are competitive with the Yankees and Red Sox.
--tim francis-wright