"There's a significant amount of capital that has beenaccumulated in the distressed sector," E&Y's Gary Koster tellsGlobeSt.com. "Currently valuations are pretty low peak-to-trough,probably down 25% to 40% from 2007. The problem is that therearen't an incredible number of sellers at these evaluations."

With lenders more often than not extending the terms of loans,"Nobody's forcing the issue," says Koster, global leader of realestate fund services at E&Y. "The unintended owner has alwaysbeen a significant contributor to deal-flow in the distressedsector, and we don't have many unintended owners. That number offoreclosures relative to the debt that's underwater is a very smallratio."

For owners, the fact that banks are so willing to forbear,rather than foreclose or otherwise sell the note, on their currentterms is "a gift," Koster says. Not only are they being given achance to wait it out until a recovery starts driving up valuesagain, "they're also collecting fees for managing the properties"in the meantime, he adds.