Now there appears to be admission that there is a bubble in the DC area, but that is of no concern to buyers because housing prices will simple rise slower, flatten out, or in a worse-case situation decline slightly. Nobody is willing to predict that house prices will drop dramatically. However, this is what I believe is going to happen.
So the wife and I are going to wait. We have a nice park-side apartment with a balcony that extends into Rock Creek Park. When the leaves drop in the fall, we can see the million-plus homes on the other side of the park. Our rent is cheap and all utilities are included. We plan on looking again in about a year, once the bubble has deflated. My guess is that prices will drop dramatically and then start their way back up. The trick is knowing when the market hits bottom.
We partly have to thank all of the investors who bought up many of the properties. When we first moved here in 2001 I went to one development looking for a house and was told that they were all sold already. I was shocked to hear that because none of the houses were build yet, just recently poured foundations. Well the houses are built and the investors have them up for sale. Good luck to them . They're going to need it.
Update: Long Island Housing Bubble Popping - Posted 20 Sept
Update: DC Housing Bubble: Popped - Posted 13 November
Market Cools in the Washington Area - DC Examiner (19 Aug 05)