Timing any market is difficult. I think it's best to buy when you are comfortable with purchasing a home. A lot of buyers have the same outlook as you. The upside is you will be comfortable feeling like the market has already hit bottom and are purchasing at a price that is about as low as it can get. The question is, what will interest rates look like then? What loan programs will lenders have available? What will down payments have to be to get those loans? Another thing to look at is will other buyers be jumping in at the same time? If that happens, the best homes and best deals will be very tough to get. We already see this on many desireable REO properties. In the past few months, I have worked with buyers that want to wait and those that don't want to wait. All of them have felt that home prices will be up in 5 years. The ones that bought did so because they wanted to get into a certain neighborhood or take advantage of low interest rates. I just closed escrow today in Northern California. It was my clients dream home.
Bottom line, if losing value on your home will make you lose sleep, than now is not the time to purchase. If you believe what you read, than 3rd Qtr of 09 is the time many experts have foreseen the market to change direction, the same time the recession is expected to end. In reality, nobody knows. It's all best guesses.
It's best to find out what your payments on that home would be today, and what that same payment would be like if interest rates went up. A good lender can do the math for you. Depending on the price of the home, the payment can be much higher with a lower purchase price but a higher interest rate.
Best of luck either way. If you have any other questions, let me know. I would be glad to help, and work through the holidays.
Century 21 Beachside