From my experience there is a quite a bit of demand for SOMA and Mission Bay. I know quite a few buyers that are young professionals who think that this is the area to be. However, most of them are terrified to buy write now because they think the market is going to continue to drop. So, yes right now the inventory to demand ratio is high because potential buyers are afraid to get into the market. Honestly, I would expect this trend to continue for the near term. I think that the major turning point will be when banks report their second quarter earnings. If people feel that they have sufficiently wrote off a lot of their subprime exposure then we could potentially see the market turnaround. There are a lot of qualified buyers who are waiting to jump into the market, they just want to be assured that the economy has turned around first.
So, if you need to sell within the next year, now might not actually be a bad time because there is a chance the market will get worse. However, if you are in a position where you can hold off for the long term (years) I think their is potential that you will have some good appreciation.