Keep living with MIL to save for condo?

My husband and I have been living in the garage of his mom's for about a year now,  We originally moved in because we both lost our jobs, and could no longer afford the rent on the house we were renting.  It's been an adventure; his mom and I have completely different personalities and beliefs so we've fought at times, but so far things have been good for the most part.  Since then we've both obtained good jobs (him, full-time, me, part-time, since I'm also a full-time student), and have been saving up money to try and get our own apartment.  However, we've been having a lot of difficulty finding a place in the area that will take our beloved 9-year old 50 lb Rhodesian Ridgeback mix, as all the local apartments will only take dogs under 25 lbs, and the few that will take him are out of our budget for an even smaller apartment- we are not paying $1400 for a tiny one-bedroom apartment, when most of the two-bedrooms here go for $1150-1300 (we're in Southern California).

As we've been completely unsuccessful, we're wondering if maybe we should continue to live with his mother for another year, and save up for the down payment on a condo.  We can probably save about $1500-$1700 per month (and hopefully I'll be able to put a bit more away this summer when I'll be working more hours), so would hopefully have about $20,000 saved for a down payment in a year. We were looking at $150,000 range for condos.  We would rather have a condo then a single family home: we both hate yard work, and it's going to be at least 7-10 years before we even think about starting a family. 

I also don't know if it's smart to purchase a home when going to grad school.  I will be applying for pharmacy school this summer for Fall '14 admission.  I'm hoping that I'll be getting into the local school, and I think I'm a pretty competitive candidate.  I'd know by December if I have an interview, and no later than March-April if I've been accepted. I'm looking at 4 years of school, but thankfully I'll be able to keep working part time at my current job, and get school credit for it, as I already work in a pharmacy (I'm a technician right now). 

Part of me really dreads living with my mother-in-law for another year, but I think I can survive.  I'm seldom home right now in between school and work, I get to avoid her 90% of the time.  Plus, I can deal with unpleasant circumstances when I have a goal in mind, and I enjoy watching our savings account grow every month.  I really miss having the freedom with having our own place- such as having friends over, cooking what we like, having sex wherever and whenever (our sex life is rather non-existent right now).  But we would both like to be homeowners, and it seems like now is a good time to get in- I'm not sure what the market will be like in another 5 years when I'm finished with school. 

 What do you think?  Should we keep living with his mom for another year and save money for a condo, or should we move out and worry about home ownership when I'm done with school (and have a much larger salary)?