In the short run it may make sense for you to rent. However, in the long run it will nearly always pay to buy. Between the potential price appreciation (as long as you don't overpay), the tax write-offs, and the latest $8000 write-off for first time homebuyers it is hard to lose. The latter would require you to make a decision by the end of this month as it is not likely to be extended.
There are also loads of new tax incentives for energy savings, upgraded appliances, windows, etc...you may be able to help someone out of a bad situation and pick up a bargain that needs some upgrading anyway. I made far more money buying and upgrading fixers than I ever saved working for a salary.
A condo is also a good possibility in Mill Valley, and there are some beauties on the sunny side near Richardson Bay. Be careful to see what is included in the Condominium Association Fees.
I've been here for over 25 years, and as much as I like to visit Fairfax for the music scene, and Sausalito for the artists and waterfront, Mill Valley is a gem (especially the unincorporated west side, Almonte, and Homestead Valley)... more