Here's a good article in the Seattle Times describing "sticky pricing" and the fact that Seattle sellers are largely refusing to make giant price reductions -- even as most buyers refuse to pay 2007 prices.
As most SCR readers know, I happen to believe that we are more likely to be in a balanced market by the end of this year than an all-out buyers' market. In fact, it seems to me that the biggest factor will be if the rest of the country's economic jitters drag Seattle down since the local fundamentals (job growth, interstate immigration, foreign investment / weak dollar, baby boomer downsizing, etc.) bode well for demand keeping up with the supply.
Of course, I suppose I'd be retired in the south of France if predicting prices were easy and can see why others feel prices will drop further. There certainly is no shortgage of lively discussion -- if you didn't see it, check out a recent SCR reader exchange here.