There are a lot of separate questions packed into those two sentences. Let me try to answer some of the issues you raised. First, the inventory of bank-owned homes continues to move very fast relative to the market as a whole. Well priced homes under 500K, whether bank-owned or not, are moving out of inventory pretty quickly. Secondly, nobody can know what the foreclosure picture is going to look like next year. We are confident that many homeowners are going to be in trouble, but the government and banking interests are still discussing potential remedies for workouts and foreclosure time-outs. The $700 billion bailout can be used for this, but nobody is certain if anything will happen until January 20 of next year. There seems to be a consensus that keeping people in their homes makes more sense than continuing with massive foreclosures. In this area, almost everyone in trouble with their mortgage is way upside down on their equity. position and deciding who takes the loss seems to be the big question for everyone. In any case, I don't think you can plan on more or less foreclosures with any certainty.
Second, many of the mortgage lenders I talk to see rates possibly coming down half a point in the very near term. That is going to make financing easier. If you're looking at FHA loans, their down payment requirement goes up from 3% to 3.5% after the end of the year, so that half point extra down payment might make a difference for some buyers and encourage them to do something this year.
Third, tax credits are nice when you can fit them in with prudent financial planning. In the case of a credit on a home purchase, however, a lower purchase price can easily offset the credit's value. You should be taking tax planning advice from a tax professional since they will know your personal situation much better than any of us can.
Finally, whether you decide to do something this year or wait until 2009, you need to get all your ducks in a row with financing pre-qualification, bank and income documentation, and the other details that can trip up your sprint to get the next great deal. Work with a buyer's agent to help get focused on the neighborhoods and current market conditions in the areas you are interested in and watch for that one home that calls to you. Over the long haul, whether you buy now or next year is going to be a minor issue for your financial and residential plans.