Ox, I read your question and the following posts, and IMHO you are wasting your time (and possibly the time of the agents here). Before I go on, I should mention that I too am bearish on the housing market and the economy overall. Second, I don't know much about the market you are looking at. But let me offer you my perspective of why you are wasting your time. I have nothing to gain or lose from this discussion except maybe offer a perspective that you might appreciate.
1. You are reading and processing national real estate, economic, and mortgage data. And true, national data has impact on local data. But across the country, there are markets that (a) have not peaked yet (i.e., prices still going up), (b) are just peaking, but very slowly, and having experienced a smaller bubble, and (c) have peaked 2 years ago and come down from the highs as much as 10 - 15%.
Yours could be in any one of those situations. And in any of those 3 situations buying vs. waiting is a tough decision.
Just because you think prices are going down does not mean that today you can buy at a price which would be prevalent a year from now. A year from now prices may very well be LOWER, but the market participants will set the price and transactions following will have to use that price as a basis.
So if you wanted to put your money where your mouth is, you SHOULD wait. This is my first point in why you are wasting your time.
2. Are you familiar with the paradox of lemons? Someone got a Nobel prize for that idea. Imagine 10 used cars, each offered at $5,000. The owners of 9 of the cars TRULY believe that their car is worth $5,000, and the owner of one of them knows that his car is worth $4,000.
You don't that one of the cars is worth $4,000, and you don't know which one it might be. You go see each of these cars, and don't see any substantial difference between them.
You then try your approach, i.e. low-ball all of them at $4,000, e.g. by sending a fax to each of them. And boom, to your delight, you get a response back. One of the owners accepted your $4,000 offer.
Now - if you think you are smart - which one of the 10 owners do you think accepted your low-ball offer?
This is a pretty standard setup in economics / game theory.
I am not saying you will end up buying a lemon. All I am saying is that you will attract lemons by making offers to everyone and their mother-in-lawl. Your offer will only get accepted by those who hold lemons, and, hopefully, you will find this out LATER. But in the process, you will have wasted your time.
3. It sounds like you have access to some scattered national data, but you don't have access to local data, and you are feeling frustrated. One part of you is pulling to buy, thinking this is the right time. Another part of you thinks, oh, wait, what about all this negative news, etc, etc.
You should make up your mind by studying the local data and your own situation (financial, family, etc). If you are buying something with the hope of appreciation, I think you will be disappointed, because most likely there will not be much appreciation in the next 5 years or so (some decline for a year or two to come, plus some slow appreciation).
If you are trying to get a good deal, IMO you should compare how good a deal is relative to your income, situation, and preferences. No one wants to buy a depreciating asset, but that depreciation might take 1, 2, maybe 3 years or more. While you might be correct in your opinion that prices are headed lower, suppose, for a minute, that they WILL be lower in 2009 than today. But for that price to realize you will have to WAIT until 2009. You are suggesting walking up to a seller, and saying, "Mr. Jones, I know your house is worth $400K today, but it will only be worth $350K next year. I suggest you do yourself a favor and see ME that house for $350K today."
Do you think any rational seller would do that?