Bottom-Feeders Feed, Not Knowing If It's Really The Bottom

Gamblers:

With this sweltering desert city (Phoenix) enduring one of the largest tumbles in housing prices for any urban area since the Depression, there is an unrelenting stream of foreclosures to choose from. On some days, hundreds are offered for sale at the auctions that take place on the plaza in front of the county courthouse.

There is also a large supply of foreclosed families that can no longer qualify for a loan. And that is prompting a flood of investors like Jarvis, who wants to turn as many of these people as possible into rent-paying tenants in the houses they used to own.

Real estate got just about everyone into trouble in Phoenix, and the thinking seems to be that real estate is going to get everyone out.

...Once again, just about everybody seems to be buying as many houses as they can, positive it will make them rich — or at least allow them to recoup some of their losses.

"I bought too high a few years ago," said Jason Fischbeck, an entrepreneur who lives across the street from Jarvis and is one of his clients. "It cost $225,000. Now it's worth $110,000. So I just paid $80,000 cash for another. "

Jarvis, 47, the former co-owner of a wood molding company that thrived in the boom and faltered in the crunch, also made some mistakes. Last spring, he contracted for three new homes in the distant suburb of Copper Basin, convinced that real estate was bottoming.

He was wrong. He managed to get out of two of the contracts but had to buy one of the houses, which is now substantially under water.

"You need to buy when there's blood in the streets," he said with a shrug. "Even if it's your own blood."

...As the day's auctions wind down, Jarvis goes back to the office to meet with a group that wants to put $5 million into the Phoenix housing market. A few miles away, the owner of that house with the monstrous power lines, Robert Corr, is being told his house was sold and he has five days to vacate.

Corr smiled when he heard the news, happy to be the latest of the 78,738 foreclosures in Phoenix since January 2005. He had already rented a van to take him and his family back to Alabama, where they would buy a mobile home and live on 10 acres of land.

Brewer Caldwell has bought about 125 houses this year for its clients. Only a quarter had owners who were living there already and willing to stay on as tenants. Filling up the rest, and all the other houses the company intends to buy, will depend on a steady supply of people who cannot afford to buy for themselves.

"If Phoenix loses population," Jarvis says, "then buying houses here is a bad bet."

As Jarvis scouts for houses, he sometimes finds a familiar one. In February, he saw a home that one of his brothers bought from a builder in 2005, camping out overnight for the opportunity. With its value now shrunk, the brother was letting it go to foreclosure.

Jarvis' daughter Jade also bought a house at the market's peak — in her case to live in. The other day she asked for advice: Should she keep paying the mortgage on something that had declined in value by 60 percent? His conclusion: "Probably not."

"Am I teaching my kids right by letting them walk away from something they made a commitment to?" Jarvis wondered.