Do you feel that the avg. buyer is educated enough to see these numbers and not start to get a bit itchy?
No, I think the average buyer is NOT educated at all about the economics of buying a house. I work with a lot of engineers (who are good in math) and even they don't understand how to value a property. There's so much mis-information floating around that its easy to get confused. I was completely lost until I stumbled upon Piggington's. And even after 2 years of studying this, I still feel like there's a lot more to learn.
From my observations, the average home buyer makes their decision to buy based on emotions. They want to buy a house first, then they convince themselves that its the right thing to do. So if the average person saw a home they wanted going for 20% off the peak and they were able to get financing for it, there's a good chance they'll take it.
I see the increased buying activity on the lower end as a natural process: prices go down, demand goes up. If prices go down more, demand will go up more.
