Moni, anybody who asks a similar question on this site will get several responses from agents and brokers who will use any number of sensible sounding arguments that always end with the same conclusion: buy right now. One has to ignore these folks because this is how they make a living. It doesn't mean they're not sometimes right, and it doesn't mean that they don't believe what they're saying, but you won't know when they're right if you don't do your homework.
If you've been watching prices over the summer, you've noticed strong reductions as the gov't credit expired. Low rates are keeping prices from plummeting, but do the math on mortgage payments for a given interest rate, and you'll see how quickly prices will fall if rates rise even 1 to 1.5%. Point is, don't worry about rates rising. If they rise, the house prices will drop accordingly.
Other thing to consider is the shadow inventory - those homes not listed, but waiting in the sidelines to come onto the market. As the banks trickle them out, they'll be priced to sell, putting downward pressure on other sellers. Take a look at good housing blogs like http://mhanson.com/blog
for more information on this topic. At current levels, it will take years for the foreclosures to clear out (just look at the number of listings on Trulia! wow.)
So my advice is buy if it's the right time for you, but don't worry about waiting and saving up more down payment either. Even when houses bottom out here, prices will probably be flat for a long time while your income goes up. The South Bay is still overvalued historically, not by much now, but it still is. Usually corrections have to go to undervalued, not just fairly valued before things start to recover. This hasn't happened here yet.