Arthur hit it right on the head with his last line. If you are ready, willing, and able now is a great time. No one can accurately predict where the interest rates are headed in the coming months. All I can say with 100% certainty is that rates are at record keeping lows and home prices have stabilized.
As for REO properties, banks are still foreclosing on properties but for whatever the reason they are holding them and make up the "shadow"market that Arhtur is speaking of. My guess is that the banks are well aware of the horrendous effect that having them all on the market at one time would have on the economy, so they stagger their listings to accomodate this.
The REO properties will be here for a while to come. I would think even well after the eventual economic recovery.
Good Luck and Happy Hunting,