Good discussion. While I agree with not trying to time the market, there are a few additional factors to consider. I would avoid bidding wars. Currently many houses are sold within days far above asking price, having received multiple offers. This is great for sellers, but not good at all for buyers. I would say buyers should be patient and not get carried away in their desire to buy a home. They shouldn't stretch their finances just because others are.

Also, you only discussed the supply side, but the demand side has to calm down at some point. People will run out of money, lose interest, etc. Interest rates will move back up, which will squash demend. This may not cause prices to drop, but it should reduce the amount of bidding wars, etc that are causing people to pay rediculous prices for houses in the market we have today.