Dump fees are based on weight , thats a lot of weight .

At the bottom of the cycle the number of listings start selling faster so a reduction in listings, more aggressive offers from buyers, days on market get shorter, and prices start heading back up.  

Often the final sales price includes a price reduction due to needed repairs.

And unless its with a lender who will allow you to RECAST the loan, what is a principle reduction going to do for you?  

Once consumption is in line, you are open to rent reduction.

Generally the T3 is the best indicator of trend and your lender will put most weight on those numbers.

I place more weight on the desire for cash flow, but as I believe its more of a spectrum than an either/or, I'm trying to identify markets where there is at least a greater likelihood for appreciation as well. 

House recently went from exclusive bidding period to extended, and I'm quite positive it will sit there untouched, until at least one price reduction (and probably past that).

The IRS considers debt reduction (when not replaced with additional equity in a new prop) to be the same as cash in terms of its benefit to you, so you would be taxed on the $125k you didn't roll over.If you don't want to carry a mortgage on a new property, you could sell, use $125k to pay off your current loan, and then put in an additional $125k of your own cash to make up the difference, resulting in $325k of equity in the new property/properties, and meeting both the equity and total value rules.So the short answer is YES, it is allowed for you to go from a $325k property to a $200k property while paying off your $125k loan, BUT you will pay taxes on the amount you don't roll into the new property ($125k).

Well, you can, but you will pay taxes on that 200k of debt reduction -  the IRS sees debt reduction and cash as the same in terms of their benefit to you.