If I go to http://www.realtytrac.com and put in the zip codes for some of the harder hit areas, there seems to be more bank owned properties out there than total inventory listed on the MLS.

http://www.realtytrac.com does not limit results to the zip code you enter. If you type in 91977, it will show you every REO in Spring Valley, Bonita, Lemon Grove, and La Mesa. If you type in 92014 (Del Mar), it will show you REOs from Solana Beach and Mira Mesa.