There are major cross currents at work as of this week which will strongly impact real estate values. On the positive side is the major change in FIRPTA which allows foreign pension investors to not bear the tax under FIRPTA. It is so far unclear if the new law applies to other than "pension" investors and includes institutional investors that are similar to a pension. In any event it should open a huge potential source of foreign capital to investing.

The much more critical negative is the announcement that regulators are forcing lenders to be much more conservative in their underwriting of commercial real estate loans. That is going to have very major impact on values. There is no bank that is going to do any more reach deals where the value they are asked to accept for underwriting is well above a more realistic value as has been the case lately. This will make many deals even more economically unviable than they already are. There has been such a run up in values lately, even in secondary markets, that for those of us who try to be disciplined, there is little that makes economic sense any more. There have been many who lately have said they cannot find anything to buy because they cannot make sense of the prices to which some bidders were willing to go. I have lost three major deals in the past few months because we could not understand how anyone justified the prices being bid for properties in which we were attempting to buy. Now the regulators have finally jumped in as well and said pricing makes no sense anymore and it had been driven by ultra low rates and too high loan to cost. If these bidders who were over paying can no longer get the excessive loans at super low cast, then prices will be forced to come back down to more reasonable levels. Otherwise the return on equity for these hyped values cannot be justified no matter what stupid projections the buyers have been making.