Do you think we'll ever get back to a market that makes sense?

Something will always give. People, whether property owners, developers, landowners, contractors, etc. aren't going to simply sit on the sidelines forever and not make money. The question isn't if deals will ever start making sense, it is when, and how. 

I’ve been saying this for almost 2 years now but I think as more and more people start needing to refinance and are jumping from ~4% debt to 9%+ debt, you’re creating a situation where you’re flooding the market with lender controlled assets. This has been playing out to some degree but I have been surprised by the number of people willing to take on negative leverage to buy those lender controlled assets.

Read Howard Marks "Further Thoughts on Sea Change" memo 

So, a couple of things. @Pokemon Master mentioned the refinancing need, which is what we've been expecting for, maybe 3-4 years now? Banks up until now have been kicking the can down the road, doing loan mods, lowering their interest rate on the deal, etc. There have been some injections from the equity side, depending on the partner/deal that have extended things too, but it does look like we're getting to the end of that rope (though again, it's been looking like that for a while now...).  A few things stand out to me from looking at some of these deals and talking with lenders:

1. New business - Many lenders have signed up a TON of new very lucrative business over the last 1-2 years at the high interest rates you mentioned. This has eased the pressure on them to really deal with the non-performing loans because they can point to the fees and new interest income that in some cases more than offset the lowered interest income from the mods/watchlist deals on their books.
2. Need for liquidity - This is related to the new business, but many of the "smaller" lenders have run into liquidity issues and can't really float the capital on the old deals and sign up new business. So what I've been seeing is that they're starting to offload their loans at a discount. It depends on how under water the deal is, location, current deal performance, etc., but I'm hearing ~$0.85 on the dollar on average (most banks balked at $0.75 on the offers that I heard go out). So, all that means is a lot of these loans will have new owners in the next year or so, and how this plays out will really depend on their strategy. If they're operators and were really looking to just buy the asset, they probably will and you'll never see it come to market.
3. Off Market Financing - Another strategy some banks are using is giving better than market financing to potential buyers where they've already foreclosed. These are usually with partners they trust/have working relationships with, but there have been some that have come to market. From what I've seen the banks are offering ~%5 interest at high leverage to entice buyers and keep their loan whole.

We still have probably 2-3 years of unwinding to do before you really start to see price adjustments and "normalcy" (either through interest rate compression, price adjustments, or operating improvements). Right now, it's pretty much where we've been for a while, a waiting game to see if interest rates drop or performance improves before many of these banks are pressured to foreclose.