Here in the Bay Area I think we're pretty close to bottoming out, if not already there. Deals are great, I still think it's a great time to buy. Prices may drop a bit, my guess $20K-$30K at best. That's not a lot of money in the housing market in my area. Once things turn, they will go up $75-$200K easily.I call these people "knife catchers" because I think the market is still a year out from bottom. Unless you get the house for next to nothing, then what you pay for it now will still decrease for at least another year.
There are a lot of people looking to rent, though. I know quite a few people who got WAY over there head in "the good ol' days" of HELOC's. Most of them lost their house and have to rent for a while.