Despite what a realtor might tell you, when you see homeowners repeatedly reducing prices like this, it is not a good time to buy. It's a good time to wait and watch prices continue to drop. When you start seeing prices go back up for a while, then it might be a good time to buy--it's much better to buy after things have bottomed out and started to increase again than it is to buy on the way down. That's sometimes referred to as "catching a falling knife."
I wouldn't consider buying anything until 2010 at the earliest. We haven't yet even seen the peak of subprime ARM resets, which should hit in the next few months. Then we still have Alt-A ARM resets to peak after that.