That's an excellent way of looking at the market, and it works to a point, particularly for the move up buyer. Let's say you live in a $300K house, and are planning to buy a $500K house, which is an additional $200K. Then things change and you decide to wait. When you relook at the market, your $300K house has fallen 10%, but so has that $500K house. So, you sell your house for $270K and buy the new house for $450K, a difference now of only $280K. In essence, you've saved $20K.
The trouble for most sellers, is that the $30K they lost was 100% lost from the equity of the home, which means they have $30K less to put down on the new house. For many home shoppers, that $30K could mean the difference between having enough of a down payment to get move-up home they wanted.
And then, if you apply a larger decline than 10% (which sadly, much of Arizona has seen), many home shoppers have little, if any equity left they can move from their current home to a newer, larger home. Home owners of 10+ years or longer (that didn't refinance their home and take cash out) can probably still move up, but home owners of 5 years or less are likely in a break-even, or even underwater position.