What kind of price trend can we expect in the Phoenix-area real estate market going forward?

My bet is that the houses that sell in metropolitan Phoenix will tend to sell below $500,000. The reason is that the conforming loan limit for Phoenix is $417,000. Anyone borrowing more than that has to qualify for a jumbo loan, paying at least 1% more in interest. The Obama rescue plan announced last week puts the middle of the market in doubt, but the top of the market — or the upper-middle — will tend to stagnate until the market turns.

When will that happen? My guess would have been this year, perhaps even now, before last week’s announcement. But by buttressing home prices above market demand, the plan the president announced last week seems likely to delay the turn of the market by quite a while.

And as Arizona Republic reporter Craig Anderson points out, FHA loan limits are also putting a squeeze on the middle of the market.

Despite Obama’s promises, this is all pretty bad news for sellers. It should be good news for buyers, but how good depends on which type of sellers those buyers are approaching.

There are three kinds of sellers right now, depending on who owns the home.

Lender-owned homes are easy to get, and easy to get for fairly low prices. They often need help, but there are loan programs that can be used to refurbish a home on the way in.

Homes owned by owners with equity are a crap shoot. If they need to move, they’ll negotiate. If not, they’ll waste a lot of your time. They want the December 2005 price, and they will happily wait until December 2015 to get it.

Homes owned by owners without equity — short sales. These can be very tough to get, since the lender wants to maximize return despite the trend of the market. You can wait four months to get permission to buy a house that is now worth 10% less than what you offered for it.

Those are generalizations. Everything boils down to working house-by-house, figuring out what the situation is and what might make a difference in swinging the deal. Complicating everything, appraisers are as risk-averse now as they were risk-tolerant in 2005. I’ve had two buyers’ houses fail to appraise, despite both offers being deliciously low. In both cases, the buyers got to take even more money off the table, but that’s not a guaranteed outcome.

I used to tell people that they would have to plan to stay in their homes for three years before that could anticipate selling at a profit. In 2004 and 2005, it was possible to move on in three months. By now, my projection is at least five years, possibly longer.

Phoenix should do better on the way up than other markets, as long as it keeps snowing in the Great Lakes. But we don’t know when the market will turn, nor with what velocity, nor do we know what other spanners the federal government will forge to throw into the works.

On the sunny side of the street, homes in and around Phoenix have not been this affordable in many years. Buying the right home at the right price is as close as you can come to a good gamble right now.

So, do you feel like taking a chance on the Phoenix real estate market? I’m at your disposal if you have any questions, or if you’d like to see some homes at first hand. Give me a call at 602-740-7531 and let’s go snag a bargain.

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