I am seeing the same thing happening in where I am, North Marin. The Realtors are pricing the houses below market value (especially if they are distressed) and receiving multiple offers. One short sale received 9 offers just last week. The REOs are pricing way below market, setting a date for response to drive up interest. Guess what, buyers are buying.
Yes, we are seeing lots of activities on the market and many buyers out there (think about the 9 offers and guess what the other 8 will be doing later?) Those are the ones who are able to buy despite the tightening of the lending industry.