So go ahead and buy that house. Yes, you might be better off by waiting for the price to fall. But don't worry about bursting bubbles, you won't end up worse off.
This is not true. If you buy a house for $600K, and the price drops to $400K because the bubble bursts, that means you lost $200K. Ouch.
What happens if you buy your house, and then lose your job and can’t afford to make your mortgage payments? Well in a rising market, you just sell it and make a profit. But in a falling market you’re in a real bind because if you bought the house with 10% down and its resale value has dropped by 33%, you can’t even afford to sell.
Prior to the new bankruptcy law you’d just file for Chapter 7 bankruptcy and let the bank get stuck with the house (such is the cause of recessions), but now you may get stuck paying for your mistake for many years. (Although, with your “means” calculated based on your last six months of income, if you can stick it out for six months of unemployment you could still get the benefits of Chapter 7—just what our economy needs, another government law which actually encourages people to be deadbeats.)
Even if you can afford to sell your house, you wind up losing your life savings. So my advice is don’t buy a house right now.