Foreclosure Auctions Show Raw Form of Capitalism PHOENIX - To the unknowing, the few dozen people milling around the picnic tables in front of the Maricopa County courthouse here every day could be jurors on break or scofflaws finally coming to pay a ticket. They tug on cigarettes, sip from big cups of coffee and fidget with their cellphones, often speaking in whispers. But instead of waiting to meet a judge, they are preparing to bid on the hundreds of foreclosed properties auctioned each week in one of the country's more colorful public clearinghouses. During the housing boom, when mortgages were being given out with no money down and prices soared, the auctions were a sleepy sideshow. But in the years since, the auctions have grown into a scruffy economic circus where bargain hunters from around the world have scooped up houses often sold for less than half of the value of the mortgage. The auctions look more like a low-end poker game than the floor of the New York Stock Exchange. The bidders and auctioneers, most of them men in their 20s and 30s, are on a clubby first-name basis, and their banter can border on sophomoric. But their trading serves a critical if somewhat heartless function: to find new buyers for houses so they can be fixed up and sold to more stable owners. "This is capitalism at its rawest," said Brad Grannis, a bidder from AZ Property Advisors. There's an asset, and people assign a value to it. In recent months, the auctions have become more competitive because of an influx of outsiders who are eager for cut-rate houses that they can resell or rent out and because of a decrease in the number of houses available. There were 2,296 trustee sales in Maricopa County last month, 44 percent fewer than in December two years ago during the depths of the market crash, according to The Cromford Report, a real estate newsletter. Many economists say that the housing market has a long way to go before it returns to health and that the decline in foreclosures is partly because lenders, often under political pressure, are trying to work with distressed borrowers. But optimists in Phoenix point to the decline as a harbinger of an upturn, albeit a tentative one. "We went lower than anywhere except Las Vegas, and we got through the foreclosure crisis faster," said Mike Orr, a researcher at the W. P. Carey School of Business at Arizona State University and the editor of The Cromford Report. I don't know if this will be a significant recovery, but even going up a few points is still a recovery. The courthouse auctions have a bloodlessness that belies their impact on people's lives. Every day, in the rain, morning chill or scorching heat, a half-dozen auctioneers set up shop on the picnic tables in front of the courthouse. They flip open their laptops and read off the addresses of the properties for sale, the value of each mortgage, the taxes due and the opening bid, which the seller determines. Homeowners" names are never mentioned. The bidders, many wearing jeans, hoodies and the occasional nose ring, work for investors who rarely attend the actual bidding. Increasingly, those investors come from Canada, China and other countries where Arizona property looks like a bargain. Local investors say these newcomers, as well as hedge funds, have driven up prices and made it harder to turn a profit. The bidders register with each auctioneer and must produce a $10,000 certified check. They consult their spreadsheets on clipboards or iPads, which list the homes for sale. Many wear earpieces connected to cellphones so they can instantly relay the prices during the auction to their bosses, who know the limit of their clients. "There's no emotion in the bidding," said Mary Nicholes, who runs the Home Ownership Center of Arizona, which bids on behalf of investors who want to rent out their homes. They all have their number. The bidding moves quickly, but there are no secret signals and bidders rarely make eye contact. The regulars help one another, and they will also cheer or encourage colleagues as if they were investing their own money. "You got a hole in one!" one bidder yelled to another who had just bought a house with virtually no bidding. Bidding companies are typically paid a flat fee of about $2,500 or 3 percent of the purchase price, with a share of that money going to the bidder. No rules are posted, but the bidders obey a strict code, the cardinal rule of which is that those who fail to pay their bills can no longer bid. One former bidder earned the nickname Runaway Bride after she won an auction for the wrong house, panicked and fled the scene without paying her $10,000 deposit. Individual bidders show up, too. Christopher St. John, a longtime broker in Phoenix, recently went to bid on a house that was near another one that he bought and resold last year, making a $16,000 profit. Bidding at the auction started at $119,700 and zoomed past Mr. St. John's limit of $125,000. The auctioneer, in chinos, a golf shirt and a Diamondbacks baseball cap, eventually sold the house for $158,000. Mr. St. John thought the house was worth no more than $175,000, and because he would have to pay about $15,000 to fix it and cover any fees and taxes, bidding that high did not make sense to him. But to well-heeled investors, a smaller profit was acceptable, he said. "It's amazing how different it is now and how many more people there are," he said. It's a battle to get properties. At times, the auctioneers and bidders are confronted with the reality of what they are trading. Some homeowners come to see their houses sold and vent their anger. A few bring video cameras to film the auction, trying to intimidate the bidders. Every so often a homeowner, having walked away from the mortgage, will bid on his own house. In recent weeks, protesters from the Occupy Phoenix movement camped in the park across the street have stopped by to appeal for an end to the auctions. For some bidders, the intrusion is another reminder of the hardship that they themselves are enduring. This month, Kelly Galles started working as a bidder after a bout with cancer forced her to give up her job teaching preschool. Her husband, who worked in construction until the downturn, is one of the auctioneers. Lured to Arizona from California during good times, they bought a house that is now worth less than what they owe on it. "It's a pretty exciting job," she said. The downside is these are people's homes. We're lucky not to be here ourselves.