In a short sweet answer to your question, YES.
Here's the long answer with explanations:
The peak (aka over-inflated value) market was in the Spring of 2006. Any appraisals done that year were a paper value, not a real value. To put it another way, while your home appraised for $240 in 2006, the likelihood of it selling at that time for that amount was essentially non-existent as sales came to a screeching halt that year.
Secondly, any improvements on a property are not a dollar for dollar match in value. As an explanation, if it costs you $10,000 to add a 3rd bathroom to a home, that does not increase the homes value by $10,000. It increases the value only as much as a 3rd bathroom is desired by buyers. In all honesty, increasing from 2 to 3 bathrooms will not increase the value of your home by more than $1,000 - $2,000. As far as flooring, siding and roofs go, those are all requirements in a home, not additional amenities. All have to be replaced at some point or another and don't increase the value of a home over the market value for a similar home (even if that home has 5 year old siding, roof and flooring). Kitchens are a requirement, and updated is just about mandatory unless you are selling the home as a 'project' or 'remodel' and that value would then be much lower of course. I'm hoping this makes sense.
Thirdly, for the past 20 months, the market value of properties has decreased an average of 1.3% each month in Kootenai County. This is continuing, despite 'agents' hubalooing about 'increase in activity', etc. The truth is in the closed and pending transactions, period. Buyers are taking much longer to 'pull the trigger', sellers are having to bring their sales prices down to competitive levels with REO's (foreclosures) and short sales, and when buyers are ready, they are making very low offers and asking the sellers to contribute towards their closing costs and to make almost a ridiculous amount of repairs, etc. in order to get the property sold.
On a personal anecdote (hopefully you'll find this helpful) - we purchased a 5 bedroom, 2 bathroom (3rd bathroom unfinished) home in May 2009 for $214,000 (2700 sf) - this home appraised for $347,000 in 2006. We could realistically sell this home for $182,000 right now. We still have to make improvements on the property (replace the kitchen flooring, remove an old and install a new fence, finish the rest of the 3rd bathroom, etc) and yet our value will not go up by doing this. Doing these repairs (aka improvements) will only solidify the market value of the property.
I hope this helps in some way. Let me know if you have any questions or need some supporting evidence. Yes I'm a REALTOR, no I will not bug you - if you have questions, you can call or email me and ask them. No obligation.