Whether there is an overabundance of housing depends on the price range being considered. In the higher price ranges ($500,000+) there are definitely more homes on the market than buyers ready to move. 13 months worth of inventory is currently listed. How long it will last is is something everyone has a different opinion about. Various factors are at play here, among them the amount of owners able to get favorable terms on refinancing, the amount facing forclosure, the number of step-up buyers, and the number of qualified buyers for the step-up buyers homes. It really is comparable to a food chain when you think about it.
In the under $350,000 range, the current inventory is much less, only 4 months worth. The reason for this is because this category is accessable to a broader cross section of the market. As well as first step-up buyers, first time buyers populate the range. That being said, there are still opportunities for great buys in the lower price range. Price of the home alone does not define a "Good Deal". Personal preferences such as neighborhood type, style of home and decor all serve the value proposition of a home. Even when the market is saturated, well maintained homes priced correctly will sell relatively quickly. Not in one week anymore, but still relatively quick.