That's the title of an article that will run in Express (the Washington Post's metro giveaway publication) this April as part of a special issue on the Spring real estate market. How do I know? Because I'm one of the real estate agents that will be quoted in the article.
So how did I answer that question? Of course, "buy!" Well, I am in sales, after all. Though I don't have a crystal ball, I do have solid arguments for buying now.
First, for anyone who already owns and is considering trading up (or down), now is as good as ever. Your boat will rise and sink with the tide, so if you sell now (low), you'll also get to buy your next place low, so net net, you'll make out okay. And interest rates, hovering around 6% for 30 year fixed, are definitely in your favor.
For new buyers, if your personal situation (finances, where you are in your life, etc) call for buying, then I say do it. Over the last 30 years, DC real estate has risen on average 7% a year. Does that mean you are guaranteed this? Of course not. The investment should be considered "long term"--in this case, at least 3 years. If you're not going to stay there 3 years, don't buy!
The one thing I keep coming back to, and I mentioned this in my interview, is the local job market. George Mason University's Center for Regional Analysis does a fantastic analysis of the local job market and its impact on local housing, and the bottom line is that the job market is, and is projected to remain, incredibly strong. Jobs draw people to the area, and people need somewhere to live. The rental supply has shrunk over the past few years, so you can bet that rents aren't going down anytime soon. It's basic economics: demand for housing is going to go up. The supply of housing will not keep pace. That means higher prices in the long run. You can view the GMU studies here: http://www.cra-gmu.org/forecasts.htm and more specifically here: http://www.cra-gmu.org/forecastreports/2007%20Housing%20Market%20Forecast.pdf
Will the market drop a bit more? Possibly. Maybe even probably. But is it worth missing out on your dream house to save 0.1% more? (check the annual drops for the area...they aren't that dramatic after all.) And what if interest rates rise? And you're continuing to pay rent in the meantime? That's certainly money you're never going to get back, no matter how long you wait.