In 2001 my husband and I were looking to buy a house. Our real estate agent took our financial information and told us that we could afford an amount twice as much as we knew we could afford. She kept trying to sell us the pricier houses while we finally fell in love with a townhouse that fit perfectly into our budget. We bought the townhouse. What saved us from the bubble was refusing to be seduced into buying a house we knew we couldn’t afford. We did get the house with no money down, though.
A friend of mine was looking to buy around 2005, and held off because he realized that many of the units being sold in the development were not “owner occupied” (though they were one-family units); they were being bought and rented out by speculators, and this was driving the prices. Within two years the prices had fallen 30% (and the prices were high).