If it's a great time to buy a house why aren't more people doing it?
a. It really isn't.
b. People want to but can't.
c. Good time for thee but not for me.
d. Some of all of that.
It is probably a great time to buy a residence to rent out (preferably multi-family unit, but even single family in places). It is also probably a great to buy if you are able and planning on staying in one place for a while.
No matter how great a time it may be, if you can't get access to funds, you can't buy. It is almost never a great time if you are uncertain about your future (as many are), or if you do not expect to be around for long. If you live somewhere that all the "deals" are foreclosures in need of a lot of work, and/or all the houses available are still very expensive then it may not be a great time in a more general sense.
It's probably a great time for investors (landlords) to buy, but for regular, owner occupier types, it's a crappy economy and things aren't so easy.