Just yesterday my boss and a co-worker were INSISTENT that now is not only a great time to buy (my wife and I are potentially first-time buyers) but that right now we are at the ABSOLUTE bottom. Their claims were largely based upon the historically (absurdly) low interest rates and that within the next year jobs were going to come roaring back to Greater Boston and that 300K dump in Arlington that I kind of liked would then be 450K. They stopped just short of using the phrase "buy now or be priced out forever."
... I asked my boss if my salary was going to increase enough to warrant the expected increase in values/asking prices and he changed the subject.
Since housing is almost always bought with debt, prices are determined by how much one can borrow. Now that banks have lending standards again, borrowing is constrained by income and previous savings for down payments. Here's the price/income ratio for the (Greater, stretching to edge of New Hampshire) Boston area, courtesy of Boston Bubble; notice how we're still above the peak of the previous bubble in the late '80s: