Related to the point below, the real estate website Trulia has an analysis out indicating that the ratio of sale prices to rent prices is now below the rule-of-thumb guideline of 15 in 98 out of 100 metropolitan areas. The exceptions are the Honolulu and San Francisco MSAs, always among the priciest in the country.
They also have some interesting breakouts of sub-areas within metropolitan areas. It's no surprise, for example, that you pay more per square foot in Manhattan than you do in Staten Island but it's interesting to see that the ratios vary. In Manhattan the buy:rent ratio is around 20, while it's 15-ish in Brooklyn and Staten Island and more like 12 in major suburban counties. Similarly the price:rent ratio in San Francisco proper is 17 but in Oakland it's only 12.
Obviously don't rush out an buy a house you can't afford or buy one assuming you'll make a fortune flipping it, but I really do think anyone out there with a good credit rating ought to sit down and take a good hard look at the neighborhoods you'd like to live in and run the numbers on the costs of renting versus the cost of a standard mortgage. After the whipsaw of the past few years, you'd be surprised how frequently buying is a good deal these days.