There is a piece in the Seattle Times Sunday edition titled "Home prices: from sizzle to simmer", which is essentially a concession that home prices are starting to cool off in the Puget sound area. A key point from that story is the statement that the average wage in King County in 2005 was $50k. Assuming both adults in a household earn that average, and factoring in relatively low interest rates and teaser/adjustable mortages, the recent median home price from the chart below(courtesy of Seattle Bubble Blog) is really not out of reach for an average household.
The Times piece also mentions the cyclicality of the Puget Sound real estate market relative to other metros in the country. The piece says that during the 2001-2004 recession in Seattle, "home-price appreciation during much of that time coasted at 4 percent or so — roughly half of what it had been in the late '90s." I attribute the fact that home prices continued to appreciate even during the recession to pent-up demand from the preceding boom years, the continuance of low long-term rates, and the rise of the creative loan packages.
Homes in the Puget Sound area are still affordable if you and your significant other both make the average wage or better, or if an individual makes significantly more than the average. I have to agree with the Times' author in that I don't see Puget Sound median home prices dropping significantly unless a large number of people used teaser/neg-am loans, or a significant proportion of homes are currently owned by investors.