I am writing from IMN's Distressed Real Estate conference in Las Vegas. The conference is targeted to institutional buyers and sellers of distressed paper, condos, home builders, developments, and land. As you can imagine, this is a very active part of real estate world right now.

Day one sessions on Thursday, June 25, provided an economic overview and various panels dealing with aspects of buying and working out distressed deals. The conference has been well-attended.

A few observations:

First, virtually every speaker that was asked still sees economic and development market distress through 2008 and 2009. There are still too many homes to sell and too many foreclosures. Periphery markets are seen as the most distressed, and some speakers wondered if they would ever come back given high cost of gas.

The situation until now has been focused in residential, but commercial markets are starting to weaken and will be next. The mood was sober, and a few I asked said they were struck by how bad it still is.

Government efforts to ease the situation are widely seen as ineffective--although the rise in conforming loan limits and some legislation on loss lookbacks are providing some help. Further efforts to stabilize mortgage markets would be welcome.

Speakers and attendees agree that the interest in buying distressed deals is much higher than the number of deals being done--a show of hands indicated that most in the room had made offers on things, but only a handful had completed a deal. This is frustrating to many who see themselves as "dealmakers."

There is still a gap in bid-ask prices that is stalling workouts--and financing is tough. This will change shortly as the pace of deals picks up; expectations seem to be moving closer together, and several speakers noted that there is lots of money looking for deals and that both sides should start giving. Distressed commercial deals are selling better because it is easier to understand value based on cash flow.

There was a lot of discussion that banks have not faced their issues and have dragged their heels on dealing with problem loans. Several speakers said it is hard to get lender attention to start a workout, and that the best solution is to default and force them to act.

Regulators are now applying pressure, and we will see more problem loans, bank failures, and mergers going forward. This process is needed to cleanse the market.

One panel discussed the future of home buiding. The panelists see a more fragmented industry with privates and regionals that focus on building homes only--supported by opportunity funds. The question of who owns the land loomed large. The industry has run a cycle with land owned by builders, to land owned by off balance sheet companies and opportunity funds, currently back to land ownership not being favored. One speaker suggested land sellers would stay in deals as participants and own the land.

The bottom line: There is no end in sight in the near term and more distressed deals to come. But let's pick up the pace! This group wants to make deals.

Peter Dennehy is senior vice president of Sullivan Group Real Estate Advisors. He may be reached via e-mail at p.dennehy@sgrea.com. This is Part 1 in a two-part series. For Part 2, please visit www.bigbuilderonline.com on Monday, June 30.