I have been hearing this a lot from buyers. I do the best I can to prepare my clients for what's going on out there in the marketplace, but there's nothing that drives the point home quite like experiencing it for yourself. I know it's frustrating, just hang in there.
The housing market in Boston especially, and New England in general didn't get hit as hard when the bubble burst as the rest of the country did. The housing recovery started around here a couple of years ago, but the national housing market is just starting its return to normalcy. Because of that time-lag things are going to heat up around here and stay that way for some time before banks see what's going on nationally and start to raise interest rates. That will put some downward pressure on prices, but I don't expect to see it any time soon.
There are techniques that you and your agent can employ to get your offer through a competitive process. As a buyers' agent, having a competitive bidding situation is also frustrating because I like to negotiate the best possible terms for my clients. In a multiple-offer situation you are competing against other buyers for the prize of actually buying the house at all rather than negotiating against a seller to get yourself a good deal. Expect a little bit of buyer's remorse when you do get a house, but keep in mind that home-ownership has benefits that go beyond what you pay for the place initially. If the market continues to grow any "overpayment" you get hit with will be erased in the long-run by an increase in value.
Best of luck! It's not easy, but it's still worth doing!