Ed clearly knows more about Cape Cod than I do, but I am familiar with the Cape--especially the Falmouth, Hyannis, Barnstable, and Marstons Mills area. I'd be cautious regarding the market, mainly due to broader economic conditions. First, in general, it looks as if the national economy may be slipping into a recession. (I think it probably did enter a recession a couple of months ago.) Even if it's not, by economic definition, a recession, I think economic activity will slow down considerably. And that'll affect the Cape in a number of ways. For those who live on the Cape and are dependent, directly or indirectly, on tourists, it's possible that tourist traffic will be down. Couple the recession and economic uncertainty with high energy prices (the cost of gasoline for people driving, the cost of aviation fuel for people flying either to the Cape or to Boston), and I think 2008 will be somewhat "off."
For those who aren't as dependent on the tourists--who either work in Boston or work in a non-service area on the Cape--I'd still expect a softening in the market due to the general economy.
Ed's right: Interest rates are great, and should remain so. And there are plenty of motivated sellers. Your difficulty could come if you have a property you need to sell, or if you need to sell your new purchase within the next several years.
Hope that helps.