Hard to believe right now, isn't it.  However, at the recent forecast seminar of the Tucson Association of Realtors they presented an analysis of the situation:

Prices have dropped 16 percent this year and REO's (Real Estate Owned = Bank Owned) make up 35 to 40% of the sales each month.  This has caused the prices to go down.  There is currently about a 10 to 11 month supply of homes on MLS.  There is nearly no new housing currently being developed.  So as supply runs low the builders won't be able to react fast enough. 

It then goes back to the simple principal of supply versus demand.  It is predicted that the median price will continue to decline through the first part of the year, but then start to rise and end the year up. 

However, the economy isn't out of the woods.  Folks have predicted that as history repeats itself, that whenever we have a January in which stocks close down - it will close down for the year.  This re-emphasizes the point that one of the best investments that a family can make is in it's primary residence.

This weak market may be a blessing for the real estate market.  Weaker markets make good agents better, and weaker agents quit.

As always, information here is deemed reliable, but not guaranteed.