I don't know the level of experience any of you have as home buyers, but I will share mine - of 35 years and 8 homes.  I am not a realtor nor am I affiliated in any way with the real estate industry.  I've moved due to job transfers. 

What has been lost on a generation of people is that a house is a place to live - not an "investment".  For decades, the growth in real value was from inflation and supply and demand.  The advantage of buyinig was primarily from the tax savings and ability to (eventually) pay off a property and live there mortgage free.   At that point, your "rent" was fixed, but for property taxes.  Without a monthly payment, you could build additional wealth in the form of savings and investments - or simply improve your quality of life.  

At some point, this whole "buy real estate and get rich" scheme took over.  "Flip that House".... etc., became the mantra for a whole generation of real estate "investors" that were getting set up to get sheared.  Keep in mind that, by the time "everyone is doing it", the smart money has left town.  The majority of the current "bubble" was created by greed, avarice, and the creation of artificial wealth by unbridled growth in credit.  It wasn't "real estate investing", it was speculation fueled by cheap credit, low underwriting criteria, and stupid people.  Yes, I said it.  Stupid people who - like the Dutch tupip mania in the 1600's - bid up values on margin, then lost their shirts.  It was very predictable.

Here's some advice: 

1.  Buy a house that you can see yourself living in for your entire life.  Most Americans move every 7 years, but times are changing.  You may move in two years, or never.   

2.  If it has an incurable defect (traffic noise, etc.,), it's not a bargain at any price.  

3.  Buy a house to live in, not as an investment.  If you want to consider it an investment, realize that investments are, by definition, "at risk capital".  

4.  You don't lose a dime on anything you own until you sell it.  Conversely, you don't make a dime on anything until you sell it.  Worrying about your "investment" losing value is going to do nothing more than give you ulcers.  If you spend your "profits" before you sell it, you may find yourself upside down - and homeless.  Those profits are elusive and can best be compared to "fools gold".

5.  Don't get emotional about a home.  It's nothing more than a pile of bricks and sticks.  If you get emotional over a home purchase, you'll likely make a mistake.  Buy only what you can afford today.   In this current economy, your income may (at best) stagnate for a few years.  Assuming you'll get that raise you've received every year for the past 10 years is foolish.

6.  The best time to buy is in a market such as this.  I've purchased almost every house in a down market... and told was told that "I paid too much" by all the arm chair experts.  The truth is that I came out at the end (at worse) with all my money, plus enjoying my "bank rental".  There is a sense of security and personal satisfaction in owning a house.  I've owned two of them outright... because I've never been a payment buyer.  Interest rates change - what you paid for it does not.  The tax deductions reduce your actual "rent" to the bank, where the rent paid to your landlord does not.  In fact, you may even get a rebate of your "rent" in the form of equity when you decide to sell.  

7.  Buy a house with good bones.  Cosmetics are an easy fix.  Landscaping is easy as well.  Broken foundations are not.  If it's a price that's "too good to be true", it probably is.  Location, school district, community reputation, tax base, location in the tract.... are key.  No amount of stainless steel appliances and granite countertops will overcome a poor location.  

8.  Consider the down payment money as a loan from you.... to you.  Pay yourself back on a schedule as well.  It can be done.  Easy?  No.  You may eat more ramen than filet, but you'll come out ahead.

9.  Don't buy someone elses flip/remodel.  They likely used crap materials and hid defects behind the new drywall and pretty tile.  You're infatuated by the decorating, not the property.  Whatever you do, don't get into a bidding war.  It's only worth, to you, what you're willing to pay for it.  Anyone who lists a house under market, in an attempt to incite a bidding war, is unethical.  I wouldn't buy the house, even if I loved it.  Why?  Because it's not a rational decision..... it's an emotional one.  The seller (and the broker) know that.... which is why they did it to begin with.  Like being manipulated?  Then keep on being a sucker for this type of behavior.  

10.  If you need some exotic mortgage product to afford the house, don't buy it.  You truly can't afford it.  Option ARM's, negative amortization, interest only.... forget it.  It sounds good on paper until you're deep into it and you find out what that fine print really means in the real world.

11.  Trying to time the bottom of any market is a fool's play.  If you buy too soon, you'll think you "paid too much".  If you buy too late, you'll think you "paid too much" and "if only...." will be your cry.  Get over it.  Odds are, you aren't that smart.  If you were, you'd have timed every other market and wouldn't be worried about a few grand because you'd be so loaded it wouldn't matter. 

I read the one post from the guy who says "you're going to lose your shirt" in his response to the other poster that said he was okay with being underwater for a few years.  If you were to listen to the doomsayer, you'd never buy anything.  A new car loses 10-15% of it's value when it goes over the curb.  So does a used car.  Don't own a car?  Your bike is worth 25% of what you paid for it.  The dinner you ate last night is worth zero.  So is that movie you watched at the theatre.  Your new shoes have zero value after you wear them outside just once.  Your iPhone, laptop, etc., are worth only what someone is willing to give you for it.  Same with stocks, bonds, tulips, or... houses. 

If you were to follow his advice, you'd be naked living under a bridge in a box.... 

Do what works for you.  Just don't be stupid about it.  There's plenty of information to guide you in making a sound decision.  Use your head, do your homework, have some patience, and you'll be fine.  

Do you think realtors and mortgage brokers are "thieves"?  Trust, but verify.  It's easy.  It just requires thought and patience - and the guidance of someone who has gone through the "dance".  If a realtor or mortgage company misleads you, call them out on it and walk.  There are others out there that are ethical.  I usually go through three or four agents before I find one that I trust.  Listen to what they say.... there are some things that they, legally, cannot say.... but will still communicate with you if you learn to ask the right questions.  They can't say it, but they can respond to your question if you bring it up.   I never use a mortgage broker.  I've always dealt with the bank directly.  We refi'd with them 2 months ago.... at a lower rate, locked for 30 years, with no points or fees.  I can do that every 2 months if I so choose.   

The truth is.... we're on a trajectory to go back to the economic behavior of the 50's and 60's.  It will be refreshing.  It will slow down the volatility until a generation of people get past the pain of this meltdown.  As memories fade, history repeats itself.