Cato, I have been watching these areas too for a long time, and denial is set in like cement. These areas weren't subprime hunting ground, but many may have been refi's with Option ARMs so will reset this year, therefore it may be worth waiting a bit longer. As I understand it, an offer has to be written up by a broker which costs money, and some brokers may not want to put in an offer that they know their client won't accept. I believe they have to by law, but there many be a bit of resistance. If you look at Redfins charts you'll see listing vs sales percentages which will give an idea of where you can low-ball and by how much. I think you will find that eventually, these areas will come down to more affordable prices, in spite of what anyone tells you, but you may need to wait at least another year.

If the property is a stressed sale, has been reduced in price several times, and has been on the market for some time, your chances are better, and anything between 10-15% below asking (assuming it's in line with other listings) may clinch it. My bench mark is for a return to 2001 inflation adjusted prices, which is where I feel that historically prices should be, nothwithstanding any previous abnormailities. At the current rate of declines many areas will there by 2010.

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Cato wrote:
I'm starting to shop seriously in the Arcadia, possibly San Marino area.  Unlike many other LA county areas, the prices haven't dropped much at all.  Sellers are still listing like it's 2007.  Many of these homes have been on the market for many months.  In the 700-900k price range, how low can I offer and still be taken seriously?  10% below asking, 20% or more?

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Cato, I am very familiar with the Arcadia market. Prices there have held firm but nothing is moving. Sure there are the occaisional sales but no where near the activity of even just a year ago.

Do some homework. This site is somewhat abandoned but has great info:

http://www.arcadiahousingblog.com/

Also I encourage you to dig up what the RE market was like in high end areas like San marino, Malibu, Bradbury, 90210, Neport, Laguna, etc. back in 1991-3. There were hundreds of foreclsoures and thousands of homes for sale and not a buyer in sight at even "low" prices.

That's when I purchased my home  in one of the above markets at 20% in back of comps and 28% in back of appraisal.  Even that did not save me as homes prices conitnued to plummet another 18% over 2 years then no appreciation for about 2 more years.

Be patient, home prices are going nowhere but down. We have not even seen any effects on the resets yet. This will bring a flood of for sales.