Will the turmoil in the funds that have invested in instruments backed by mortgages effect the Southern California residential or commercial real estate markets?

Recently, two hedge funds, High-Grade Structured Credit Strategies Enhanced Leverage Fund and the High-Grade Structured Credit Strategies Fund, that invested in securities backed by mortgage were significantly effected by the losses.  Now United Capital Asset Management is having problems.  Paul Ullman, who runs  the hedge-fund firm, HFH Group LLC, New York, was quoted in the Wall Street Journal (WSJ) saying, "The marketplace for mortgage-related asset-backed securities is characterized by a wide difference between bids and offers, and as a result, trading volume has dropped."

This will likely led to even tighter credit moving forward for every new mortgage borrower.   Further, this will put  pressure on  residential home prices.  Thus, there is still no end in sight to the current market conditions.

On the other hand, with employment high there is no sign of accelerating deterioration on the horizon.  The most likely causes of any accelerating deterioration continues to be consumer spending, as I have written about previously.

Another possible cause is if commercial lending is affected by generally tighter credit.  This would damp companies ability to grow and hire and the lack of hiring would likely effect consumer spending.  However, there is presently no sign that this is occurring.