The Valley’s housing market saw its lowest amount of sales activity in a decade in 2007 — as existing-home sales limped along in December.

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But real estate agents are betting that low interest rates and screaming deals will spur reluctant buyers to get off the sidelines in 2008.

2007 “started not too bad, and it was relatively OK, and then it was just sort of a nose dive,” said Jay Butler, director of Arizona State University’s Realty Studies Department.

A total of 3,290 existing-home sales were recorded last month, a nearly 30 percent drop from a year ago, a new ASU study shows.

In 2007, there were 50,975 sales, the lowest number of sales since 1997. That’s also compared with 67,035 sales in 2006 and 110,835 in 2005.

The lackluster sales stemmed, in part, from the mortgage industry’s dramatic downward spiral, with tighter lending standards making it tougher for potential buyers to qualify for financing.

Many people are also hesitating to buy despite low interest rates and are watching to see if prices keep falling.

But buyers are still out there, and loans are being made, said John Stih, CEO of the Southeast Valley Regional Association of Realtors.

“The problem is, they can’t sell their homes,” Stih said.

More than 50,000 homes are currently for sale Valleywide.

Home sellers are competing with one another and with builders, who are off loading inventory homes at heavily discounted prices. Investors have also dumped large numbers of houses, forcing sellers to compete with foreclosure properties and leaving neighborhoods with vacant homes.

Fortunately, there are still thousands of people moving to Arizona, which should help chip away at inventory, said David Donaldson with Russ Lyon Realty in Gilbert.

Houses in the right areas at the right prices are selling, Donaldson said.

Experts say areas closer to the urban core that are near employment centers, shopping and freeways have weathered the market downturn better than outlying areas, such as Queen Creek or Maricopa.

Homes on golf courses and lakes seem to be holding values better, too, Donaldson added.

Sellers are also becoming more realistic, Stih said. Many who bought several years ago before the big run up in appreciation may lose 10 or 15 percent in value from the top of the market but will still be ahead of the game, he said.

“You’re not going to see 2005 again in your lifetime, probably,” he said.

Stih added that he believes the market may soften more but begin to rebound near the end of the year.

The median sales price of an existing Valley home in 2007 was $257,000, a 1.4 percent decline from the prior year. But the median price saw a larger decline throughout the year, dropping to $232,000 in December from $260,600 in January, according to the Realty Studies report. The median still remains above the national median sales price of $210,200.

Demand is still good in areas of Tempe, Mesa, Scottsdale and other cities, and people need to think positively, Stih said.

The question for buyers waiting for the market to drop further is “how do you know you haven’t waited too long?” said Dominic Scappaticci, president of Scottsdale’s The Equitable Real Estate Co.

Sellers are willing to negotiate, there’s a huge selection of homes and interest rates are near historic lows, he said.

Mortgage interest rates recently experienced their biggest two-week decline since May 1995 — dropping nearly half a percent since Christmas, according to Bankrate.com.

It’s not the time to buy for those who plan to flip properties, but those who want to stay in the home at least three to five years shouldn’t be hesitant, Scappaticci said.

Times are tough but that’s when some of the best deals will be made, he said.

“People need to make decisions,” he said. “If it’s going to go lower, I don’t think it’s going to go much lower.”