Well qualified buyers continue to purchase homes. 

Most of these home buyers are those that have been hoping to buy for several years and now find that they have a greater selection of homes to choose from.  Many home sellers are pricing their properties to sell quickly and some well priced homes continue to sell in multiple offer situations.  Some of these home buyers want to purchase because of the mortgage tax write off, others because they are simply tired of renting with all that renting entails (rent increases, moving because the owner elects to sell the property, wanting the opportunity to personalize their living space, etc).

Is now the time to buy? I don't have a crystal ball and no one knows where prices are heading, but one thing seems certain: real estate prices go up, then they go down and they go back up higher than they were before.  If you are thinking of buying a home talk to your accountant or CPA  - find out how the tax deduction will benefit your particular tax circumstance.

Get out there and look at homes... get a feel for prices.... Get prequalified- preferably on a conservative program such as a 30 year fixed interest rate (discuss your personal circumstances with an experienced loan officer).  If you don't visit open houses or look at homes with a Realtor, how are you going to know when "the one" pops up... it's like dating, you have to kiss a lot of frogs before you meet your prince (or princess).