It's hard to predict the future, Like you said you never thought the prices would get to where they are now 3 years ago. I didn't think they would either not this quick.
We seem to go from one frenzy to another anymore, probably because of the money they generate and our want it now additudes.
I too think the prices will ajust but probably not by as much as you think, Wayne.
In the early 90's real estate prices dropped about 30% give or take.
At that time we were loosing Areospace jobs right and left and the media really ran with the doom and gloom forecast for the southland/Ca.
Then we topped it off with the Northridge earthquake, Thing's were a mess in RE.
This time I'm hearing bubble but not to much doom and gloom from the media.
And the Earthquake, Well they are predicting one but we'll have to wait and see.
We bought this house in Simi Valley on Christmas break 95/96 and that was about the bottom of the last downturn, I thought it was.
But the future correction might not be so soft because of the demand for southland property. I think just about everybody on the planet that likes good weather would like to live here, So there's the demand.
If you do deside to stay you could make an office in the big garage, I'd put a couch down there too
Oh, and always buy a house that you can grow into instead of out of. Just do it even if you think you can't afford it. And be willing to pay extra for a special property, there are houses and then there are houses, But a good location and quality construction are money well spent.
And most of all, Good Luck
Edit: Just to ad, Good neigbors can be hard to come by, We have great neigbors now that I wouldn't trade for a bigger house. Ask me how I know.