It’s hard to say whether prices will come down much more in this area or anywhere in san Diego (at least in this price range). I used to be in the same school of though, that is until I started actively looking for homes in the mid 3’s. In over 10 months of scouting neighborhoods and making over 15 offers, I’ve seen nothing but intense competition and price appreciation, at least for desireable, somewhat remodeled properties in nicer or more desirable areas.

You make a good point with interest rates, but that’s a bit of a catch 22 for us. If rates really are at 30 year lows (even if artificial) they probably will go up somewhat in the next few years. Due to the massive influx of printed money the gov has fused into the economy, we’ll also see some inflation. While we’d probably be earning more money in a few years, we’d still be paying more in interest then than we would now. On the flip side, by buying now, we can “benefit” from future inflation by having the house value increase and also lock in the superlow interest rate.. Not to mention mortgage interest tax deductions, and the nice 8k tax credit. (I put benefit in quotes because I realize any price increase due to inflation would mean similar price increases on any move-up homes. At least by buying now we would have a ticket, so to speak, to ride the inflation train up.)