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Playing Defense and Clearing the Air

Everybody is playing defense. That's what one real estate industry vet told me today in a conversation on the markets. Everybody is scared to go on offense since they not only can't figure out the complex, pretzel-like debt structures of old deals, but they also realize values have nowhere to go but down,...

By Jonathan D. Miller | Updated on July 10, 2008

Everybody is playing defense. That’s what one real estate industry vet told me today in a conversation on the markets. Everybody is scared to go on offense since they not only can’t figure out the complex, pretzel-like debt structures of old deals, but they also realize values have nowhere to go but down, and value declines have only just begun. So capital rich players hoard money waiting for greater clarity, and capital poor owners wait to get hammered on refinancing and debt restructuring. In the middle, banks and other lenders play for time hoping the economy improves enough so that their borrowers can find firmer footing to restructure. And hopes are about all anybody has when it comes to the economy.

Many observers have been pinning more positive outlooks on continuing strong US export activity. But other economies — particularly in Europe — may be flagging, following our lead rather than pulling us out of our skid. Certainly the UK has been troubled. Now Germany may be starting to stall. Spain and Italy have been in rough shape. The picture gets cloudy. The US consumer pullback also spells trouble for Asian countries which have been shipping all that stuff over here for us to buy. Will China hit a post Olympics malaise? Ya think?

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