While I don't think prices will rebound in 2010, I think we may be close to the bottom, and might see a modest increase within the next few years.
The biggest problem is not the value of the timeshares - the value has always been there. When compared apples to apples (with vacation homes) rather than oranges (hotels), shared ownership still makes sense.
What I hope will happen over the next decade will be a shift in ownership, from those who really shouldn't own timeshare, to those for whom it makes sense. Some of the developers are marketing their timeshares to the appropriate audience - requiring significant income before inviting people on tours - but not all are. Even then, income doesn't tell the whole story.
Timeshares should be owner by people who would otherwise enjoy a vacation home, and who would not be happy in a hotel room every year. It is not really a way to save money, but to improve what you get for your money.
I have neighbors who vacation every year in a hotel, and eat out every meal. I have other neighbors who go to an all-inclusive resort every year, leaving the kids with relatives when they do. I have others who don't vacation, because they struggle to make house payments. None of them would be happy with a timeshare, because it doesn't fit their personal needs. These same people also wouldn't be happy renting a house on the beach.
On the other hand, over the years I have met many happy timeshare owners - from one of the librarians in the small town we used to live in, to one of my DD's teachers, and other local families. In every case, timeshare has allowed us to vacation in a way we couldn't otherwise afford. Children who have visited not just other states, but other countries, and experienced different cultures. Families who vacation together.
In my experience, the families that have been happy are also the ones who budget ahead for vacations, rather than figuring out how to pay for them after the fact. They are the families who visit the public library when a new book or DVD comes out, being willing to wait a few days rather than purchasing or renting the day it comes out. When we buy a DVD it's one we know we'll watch over and over.
The owners who are selling now at the rock-bottom prices are the ones who cannot afford their timshares, not because they don't have the income to support them, but because the types of vacations we enjoy with our timeshares do not hold a priority position in their lifestyles. They have other priorities, whether it is a monthly trip to the salon to have a manicure, $200 a month cell-phone plans, or cable TV. There will always be those kinds of sellers, and many will end up settling for extremely low resale prices, because they have bought into the idea that their timeshare is worthless. They tried to sell at a ridiculously high price, they paid someone else to try to sell it at that price, and have given up. Then they've seen someone else selling for $1, and decided they would rather take $1 than wait until a reasonable offer comes along.
While the "brand name" timeshares are selling at higher resale prices than many independant resorts, they are not really worth that much more. The annual fees at those resorts are often higher than the smaller resorts, and in many cases, the smaller resorts trade just as well as the luxury resorts. I expect prices at those smaller resorts to rebound faster than the big names, mainly because there aren't as many on the market, plus the lower fees do make them more "affordable."
When you get to the luxury level, timeshare might not make as much sense - particularly for those who don't need that extra bedroom, or the kitchen facilities. But for upper middle class families, traveling with children, they still make great sense. I personally won't go back to sharing a room with my kids, having to turn the lights out when they go to bed, and having to eat out every meal - the kids would enjoy that part, but it becomes a huge part of the vacation budget.