I don't envy those attempting to navigate this housing market. Nothing but empathy for you all, it's crazy and it sucks.
IMO, like most things, there's no one-size-fits-all strategy.
If you're reasonably certain you're going to put down roots for a long time (10-ish years) AND you have a good down saved AND you have a reasonably stable career/job AND you really can't stand apartment living/need more space/really want the suburban dream of a yard and dog and such, then make the leap. And don't look back, stop looking at real estate and get on with life making the most of your new abode. You're making the best decision with the available information in a difficult situation. No point obsessing over past decisions, it's a sunk cost. You'll have to make more compromises than usual, so be super clear on needs vs. wants and be flexible, then make peace with it.
On the other hand, if any of these conditions aren't met than hang in there! Keep renting and saving. If you're pretty sure you'll buy in 1-5 years put the money in something conservative (savings, CDs, short-term bonds, etc.). Keep watching your target markets and be ready to jump in if/when a good opportunity comes along.
About 3 years ago we sold our primary residence in anticipation of a long distance move. We knew we would tap the proceeds from this sale in ~2 years, so the amount we budgeted for the new house was put in a short-term bond fund, with the rest going into a REIT fund. A split strategy of sorts. If RE crashed, we would tap the bond fund. If the opposite happened, the REIT fund should help offset the higher purchase price. As we got more serious about house hunting (2020Q1) it became apparent that prices had increased and we needed to increase our budget, so we cashed out our REIT fund, which was an incredible stroke of luck as this happened mere weeks before the market crashed.
One caveat I should add: A lot of this depends on whether or not President Biden gets his way w.r.t. increasing taxes on capital gains. The devil is in details yet to be finalized on how these cap gains will affect AGI and vice versa. So although it only applies to income over $1M [actually, looks more like $500k, which would snare a lot more people], with regular income plus gains on large investments, it's pretty easy to get pushed up over this limit. With 40% at the federal level and 13% state (e.g. CA) you could be looking at >50% tax on some of the gains. Depending on your personal tax situation, this may or may not be a big problem.