Mary, the fact that you are looking to buy allows you to take advantage of all the homes on the market. In terms of over development, its more a matter of preference. There is not much room left around Dollywood for further development so you are safe in that aspect. As far as the rest of Pigeon Forge and Sevierville goes, building is full steam ahead. Mainly Svierville!
As far as resell goes, well there is unfortunately no good answer to that question. Many analysts state that over the next 2-3 years we will see a leveling and rebound of the market. Who knows. With all things considered in the country right now it is anyone's guess. I know that is far from a definative answer but it is the best one I can give. Anyone that tells you otherwise (market condition in 5-7 years that is) is just blowing smoke.
We are showing more and more property every week as Spring gets close. There are many different vacation/rental properties available in a number of price ranges. Do your due diligence and find what will work best for you and your family. Be conservative and the next 5-7 years should have only positive things for you.