In response to Chris the unfortunate thing about the credit boom/bust is that only one leg of the problems are yet to hit the financial markets. Thus far the financial markets have only had to deal with the capital crises as a result of residential mortgages. What will our financial markets look like in 6-12 months when all the short term commercial real estate loans start coming due? Which bank or financial institution is going to have capital to refinance these loans? Or maybe a better question is who will want to expose themselves to more real estate loans? And the ones that do have capital won't be able to refinance all of the loans. Then what happens to the projects purchased by buyers when they were focused on lolla-land "projected" returns or for those new developments that don't have tenants in place to support current or future mortgages? I hate to say it, but I think we might see commercial real estate prices taken down quite a bit from here. I don't want to see this happen, and I personally hope it won't, but there is a good possibility this will happen as the commercial real estate markets and the capital markets meet with an imbalance in supply and demand. Combine this with all of the other economic indicators working against us such as soon to be higher unemployment (is 7% an unreasonable estimate), a further reduction in GNP (if not already in recession) and an illiquid financial system and this mixes into a volatile concoction. Lets hope the resulting explosion is a dud or at least just some fireworks seen from afar.

"Without credit to fuel deals prices will need to adjust. With a tighter underwriting process and a lowered level of leverage, sellers will be forced to lower prices if they need to sell their property." I agree wholeheartedly and though hindsight is 20/20, lending should never have reached the point it did in 2005 to early 2007; so, I don't think we will return (and somewhat hope we don't) to the lending that fueled all these problems. Just as some CRE projects never had business being built, there are many loans that had no business being originated and extended. Just like the tech boom, things got out of control. People were receiving money for internet ideas but weren't making any money and were in fact burning through cash. Isn't this similar in that buyers and builders were receiving money for properties and projects that only projected to provide decent returns upon the rosiest projections (and assuming continuing price appreciation). In sum, the tech boom/bust and this credit boom/bust are quite similar. We didn't and don't want to return to the excesses of that period so why would we want to return to the credit/lending excesses of this bust? Decent rates and LTVs are still available, just not at crazy rates of sub 6% with 80-90% LTV.

Bugley please: buuuuurpabuuur, buuuuurpabuuuuur, etc., etc. I normally read this blog and immediately reach down to remove the proverbial pebble from my shoe which always seems to bother me afterward, mainly because of the negative bend of the author, but today is an exception. Today I happen to agree whole heartedly with Mr. Miller. Today we've entered new waters, and we are up a creek without a paddle. After watching a historic meltdown of our financial markets early in the day, and then speaking with many CRE investors throughout the day, paralysis might be a welcomed prognosis. Today set the stage for the mortician to come in and make this pig look pretty for its final resting. I agree with Mr. Miller's assessment that the market is months, and perhaps years away from being able to produce financing which would remotely resemble anything market participants had enjoyed over the last several years, and i might add, was awaiting a return. And without credit to power this market how do we get values to rise, our even remain at current levels? We don't. Without credit to fuel deals prices will need to adjust. With a tighter underwriting process and a lowered level of leverage, sellers will be forced to lower prices if they need to sell their property. Commercial real estate loans have not been a part of the Capital Markets problems, until now. During the next several quarters and into 2010 we will have many short term and construction loans maturing for projects started long before this turmoil began. And because there is little liquidity in this market without guidance as to when liquidity will return borrowers will have less options to refinance these loans. You just need to look at what happened earlier today when banks went to the loan window to sell $173 Billion, and were only able to sell $43 Billion of their loans. Maybe they'll be able to sell more sometime in the future, but right now they are confronted with the realities of reduced liquidity. "At what point do we say death has come? Death is a process" "and all organs do not fail simultaneously. Today´s technology can restore and sustain the function of many" "organs". The above can be said of the multi-part failures in our capital markets, and the rescue of some of its parts by the federal reserve and the treasury. "Machines can operate for hearts that do not beat and lungs that do not breathe on their own. The question of when death is final is complex." And many could argue the "machine" has been the treasury, and hopefully tomorrow the Fed (rate cut). Our financial markets have been on life support. The quotes above and below come from a 1968 Harvard Medical School Committee which defined a physiological definition of death. "The new understanding of death is largely a consequence of technological advances in life support systems." I sure hope Secretary Paulson took Chemistry in College, and can keep the mortician away from the patient.