"There's no lack of money looking to buy real estate," explains Tyler Anderson, vice chairman with CB Richard Ellis' Phoenix office. "The problem is that a lot of sellers don't want to sell at today's prices. It would be far below the levels of debt currently on their properties."

Nor are sellers the only reluctant ones. Rue Bax, vice president with local Orion Investment Real Estate Solutions, says lenders who had to take back product through default or foreclosures are slow to get things moving. "There seems to be a disconnect between where lenders are valuing the product they are taking back and the amount buyers are willing to pay," Bax adds. Instead, he continues, lenders are holding on to the product in an attempt to stabilize before selling once the market gets better.

But it isn't only sellers and lenders that are being somewhat inflexible. "Buyers are going to have to take some risk," comments Bax's colleague and Orion Investment president Ari Spiro. "Most buyers are currently looking for a great return, based on the most pessimistic assumptions."

However, Alon Shnitzer, associate vice president with Marcus & Millichap Real Estate Investment Services' Phoenix office points out that the 2009 market wasn't completely dead. Approximately 3100 units traded in metro Phoenix during 2009, which was close to twice the amount of transactions completed in 2008. Bax adds that some deals were able to get done, thanks to all-cash purchases and reworking of seller debt.

Shnitzer further explains that if lenders figure out how to get things moving, more transactions could be completed in 2010 and things could start to turn around. "This all depends on what will happen with financing," he comments. "It can't get much worse for the (class) C and D product; buyers will have to take that all cash." But financing for the higher-quality assets is available through Fannie Mae and Freddie Mac.

Will more of those assets be available for purchase in 2010? Bax and Spiro point out they're tracking approximately 200 multifamily assets that are liable to go into foreclosure because of overleveraging. But the level of distress in the market will be directly proportional to the desire of lenders to either take back product or rework/remodify existing loans, Bax comments.

Either way, Anderson says, lenders will be a huge part of the Phoenix multifamily market in 2010. "We'll see a lot more of them in the market this coming year than we did in 2009," he comments. "Most lenders understand we're running along the bottom, so they'll be out there."

While the 2010 market will continue dismal for sellers, Anderson continues, it will be a great time for buyers. Buyers acquiring based on today's revenues will end up with a nice investment once things turn around.

But buyers need to understand that waiting for the big deal means they'll miss out, Spiro points out. "That deal will be purchased by someone else before it becomes an obvious great deal," he remarks. "The market always rebounds faster than the masses anticipate."