It sounds like you have a tough decision on your hands. If I were you I would start by establishing the true current price for the house. This will NOT be done by looking at listings. You will need to find the actual sales price. There are many ways of doing this, and I am sure that someone else has a better way, but the tool I use is quick and dirty. I look at Zillow and use their comps to the house. This will give a very long list of many properties that are not really comps. They are simply in the same city. It is pretty easy to then save the file as a text file, import it into Excel and crunch it down to a list of true comps based on square footage. It will still be incomplete because you won’t know if there is a swimming pool etc., but for a place like Temecula, square footage is probably going to get you where you need to be. Once you do this, drop the number another $5-10K to account for the fact that the selling price tends to have some sort of incentive buried in it these days. This will probably land you at about $380-$390K for that house right now. Then it is a simple task of looking at buying a house now for what will probably be 10% under market or waiting for a better deal.
The other side is the hard part and what you will decide with yor family and that is the value you place on the schools, crime rate, hassle of moving etc.
I have done this exercise with my situation and I have set the bar at 10-20% below current market value for my target neighborhoods as the point where I think the risk reward ratio is balanced and I am willing to buy.
One last comment, the 100% financing you mentioned should be a red flag that the timing may not be right. If you can afford 100% financing on this house, then you can also afford to save for a down payment and wait for what are probably better options in the future. I would say that if I were in your shoes I would be sitting tight and saving.
