There is no doubt that Realtors were overpricing homes in 2004/2005 and anxious buyers were purchasing, but many people moved to Charleston (where I'm returning after a short move to Jacksonville, FL) with strong salaries which allows them to barely survive the huge mortgage payment. I would not look upon buying in the Charleston area as an investment. For a primary home, cool. For an investment that will appreciate? I'd be leery of that. Just look at each property individually and plan your attack based upon the situation of each individual homeowner's plight.
I personally know of MANY that are over their head with awareness that their equity is gone because they bought with 100% financing at the 300-400K range. They no longer care if it's a short sale because of the Mortgage Forgiveness Debt Relief Act. With that, the financial repercussions are gone. But get a realtor heavily experienced in short sales because it's a very complicated process. One of my friends used a realtor not well versed in short sales and both the buyer and seller had a nerve wracking time during the negotiation process with the bank. Had the realtor been experienced, the timeframe would've been short with much less hassle.
I can't stress it enough that you should negotiate for a "short sale" at every step of the turn. And I would strongly recommend that you not deal with a Realtor that has experience of less than 10 short sales.
Remember, "You don't make money when you sell a house. You may money when you BUY a house." I'm a school Economist and quickly learned to laugh at National Association of Realtor's (NAR) economic forecasts. Research will most definitely payoff and verify whatever any realtor tells you. Be very wary of realtors at every step of the way, as they get their information from the (NAR) which is very biased and unsubstantiated. They have been making statements such as that since 2003 which hurt hundreds, if not thousands, of homebuyers in this region who are financially upside down in their homes.
As for me, I'm looking at paying $190k for a home purchased for $200k in 2000 because $190k is owned on the note. That's a 5% drop in price since 2000, but it took a lot of research and luck to find this home.
And, for what it's worth, I like Randall's answer the best.