I read recently that banks, strapped with required reserves for insured loans, don't HAVE the money to lend right now with any kind of volume/leniency. Further, it was indicated that there is a new breed of foreclosure involving homeowners who, having noticed the shortfall in their equity, are choosing to walk- it's becoming too accepted an outcome for some without financial hardship (just a bit of short-sightedness). They can buy again in five years when the market is more clear.
This glut has forced banks to assess the cost of the short sale process. Loss mitigation in unexpected volume is creating a real problem- and they're likely assessing if foreclosure isn't less costly for them.
So, it would seem that the time to NOT purchase a home is when it isn't an urgent need, and the decision comes at a time where foreclosure or short sale pricing doesn't match the income of someone looking to buy- better to wait until there's an indicator that signals the bottom.
Investors notwithstanding. There are avenues for investors that begin before things hit the mainstream.
Investor activity is a good thing, and worth keeping on top of. Just an opinion.