Today's lower values are your reality.
But not to worry . . .  It is all relative.

The house you sell goes for less these days, and the house you'll buy goes for less these days.

Starting to see how you'll come out on top ?
If your home appraised for $250,000 in 2007 you will probably find agents recommending you list in the $180's (ala 2005) and be prepared to negotiate and pay concessions.
The good news is that most Sellers will be moving up in terms of house/neighborhood - and that translates into a similar percentage adjustment in the home you'll purchase.
Consider - Selling that property that had $250,000 value in 2007 which has adjusted down 30% - that would be around $175,000 today's value.
An adjustment of $75,000
Then purchasing a property that had $400,000 value in 2007 with a similar 30% adjustment it would be around $280,000 today's value.
An adjustment of $120,000
That puts your out of pocket, real dollar saving at $45,000 - Thanks to the downward corrected market.

Now add to that a lower interest rate likely and see that saving balloon!