My husband and I are expecting our fifth child in May and I need to buy a bigger house.

Here's the deal: In May, it'll also have been two years living here and if we sell it before then, we lose 15% of the equity.
But I also heard buying houses after May can be much more expensive (can anyone in No. Virginia second this?).

I am not sure what to do, does anyone have experiences in this situation. Thanks in advance.

I don't believe anyone can predict whether or not houses anywhere can be less or more expensive during a certain time of year or after a certain date.

However there are exceptions and modifications to the 2 year residency rule to escape paying capital gains on the sale of a principal residence.

http://www.irs.gov/taxtopics/tc701.html

"If you did not meet the ownership and use tests, or if during the two–year period ending on the date of the sale or exchange you sold or exchanged another home at a gain and excluded all or part of that gain, you may be allowed to exclude a portion of the gain realized on the sale or exchange of your home if:

You sold or exchanged your home due to a change in place of employment or health or unforeseen circumstances."

I believe your pregnancy may qualify as both a change in health and/or an "unforeseen circumstance".

Check with your CPA or tax advisor for the best advice relative to your situation.