The issue with some of the lenders, especially the community banks, is that what were once "guidelines" for the percentage of capital employed in lending for acquisition and development (A&D) loans has now become a number written in stone.

An example is that we could lend up to 500% of our capital (equity) if times were good, but as markets slowed we would move back down to that 300% figure. Essentially based on that we could lend as much as $250 million, and then cut back to $150 million as it slowed.

Now we can ONLY lend $150 million, and because we have a number of stale developments where things have halted somewhat due to markets crashing in Whatcom County and the Oregon coast, keeping our use of capital at 374% in A&D loans ($187 million), we can't add new projects until we clear off at least $37 million in old projects, plus the amount of whatever new projects are out there that want to be added.

Now this is an oversimplification of the actual process, but it is the general idea. Our little bank is on the low end of the scale as far the employment of capital at 374%. There are many banks that are above 500%, so that is partly why banks haven't opened the purse strings. The other is why would they invest in a soft economy when there are already so many stalled developments out there.

The solution is to sell the glut of projects to first time home buyers, which is happening, but that takes time. The media is also of little help as they instill a bunker mentality, scaring people into inaction. Also, there are those who are trying to time the market, which few will do successfully.

Not just one issue. Many.