So real estate markets are give-or-take at bottom, the worst is over, recovery is in the offing. Everybody should be feeling better, but why do so many of us take pause and register lack of confidence in a solid rebound. One of the best recent commentaries on where markets are headed was released last week by Hodes, Weill & Associates.

Titled "We´re out of the woods...", the article mentions the very evident "green shoots" and "more positive signs on the horizon than at any time in the past 30 months." Among the most encouraging is "the slow return of capital," including from foreign investors and most notably sovereign wealth funds. Thanks to historically low interest rates, returns on other risk-based investments are "well below the returns that investors believe they can achieve in real estate assets today."

Then "why is there so much uneasiness?" Well simply, the "cold fact" remains "most existing U.S. portfolios are "over-leveraged, undercapitalized and illiquid" and the long-term outlook for U.S. job growth "is troubling." "At some point the private sector needs to resume the task of spending and growing, and this has been very slow to kick in.´

"From the perspective of real estate fundamentals, NOIs, especially in the office sector, are poised for several more years of declines, given the overhang of space... and weak tenant demand. While a few property sectors are doing better (multifamily, hotels) in terms of stanching decline in revenues, even these sectors face the challenges of sluggish economic growth and reluctance by  businesses and consumers to spend." The decline in NOIs will "be met head on by rising debt maturities over the next 12 to 24 months... setting up the market for a round of foreclosures, or at the very least, more painful restructuring." This in turn will force "a lower cost basis across the entire industry."

In sum, the article contends "the overall market has not really corrected and attractive investments remain pretty scarce today. Without indications of economic growth on the horizon, the risks of investing remain very, very high."

The Hodes, Weill commentary underscores the ongoing dilemma for investors in high leverage funds, which bought at or near market peaks in the 2005-early 2008 period. They are basically cooked. But as the assets in these funds eventually are forced onto market, cash rich investors will find good bargains--as long as they focus on better markets and primer assets. And until lenders push borrowers into capitulation, good deals will be hard to find.

Indeed, out of the woods doesn´t mean suddenly into the clover.