A hot market is a "seller's market." During this time, homes can sell fast and at prices above the asking price. This is not the time to try to save money. Negotiating for too long could easily cost you the home you want.
A slow market is a "buyer's market. During this time, homes can go without being sold for extended periods, with few offers being made to the seller. This is the time to negotiate for a lower price. Even if your offer is too low, the seller is likely to make some sort of counter-offer and you can begin negotiations.
More often than not, the market is simply "steady," or in transition. When the market is steady, there is no one-way to approach negotiations with a seller. The property may have a lot of interest, making your offer only one of many and leaving little room for negotiating a price. There may also be little interest in the property, leaving you open to try to save a few dollars an certainly making the seller more open to dropping his or her asking price.
Transition markets are more difficult to define. If the economy slows unexpectedly, as it did in the early nineties, people who buy on the high end of a seller's market (like the late eighties) could find their home loses value for several years. So far, no one has proven reliable in predicting when markets change or how good or bad the real estate market will become.