I had an interesting conversation with a seller whose home I held open. Her home has been listed for some time and she has reduced the price but has had no offers and is getting concerned. She was close to tears today, lamenting that if she can't get enough proceeds from the sale of her house, she won't be able to buy a home in the neighborhood to which she wants to move.
I explained the fallacy in that reasoning, and it is something that most people don't think about. If the market were on fire and her house would sell for a high price, then the house she wants to buy would also be more expensive. With prices down a bit now, her house will likely sell for less than she had hoped, but the house she wants will also be less expensive to buy. The ratios between the two are probably close to the same - just in a different bracket.
If you look at it that way, the seller who plans to buy another home isn't really losing anything with the market down, and unless her income dropped dramatically, she will find it easier to qualify for her new purchase because with interest rates and prices both low her payments will take a lower percentage of her income (and her buyers will also find it easier to qualify for a conventional loan on her house.
It's all good. Attitude is everything! We can conquer this market - it's all in how you perceive it and how you present it.