I agree that interest rates are still a bargain, I am locked at 6.25% fixed. The loft I own in Long beach is a little better at 5.50% fixed.. I see the fall as part of people getting zero interest, adjustable or reverse amortization loans and when they adjust back to a real interest rate, they just can no longer afford it.
I have been waiting for a while to get a new home and it looks like now is the time for bargains to be had. It just feels like some of the homes I have looked at, people and especially agents seem a little desperate to sell. I have also seen a large number of people doing FSBO to try to save some money..