At 11 a.m. on most mornings in Chicago, a group of mostly middle-aged men rush into a tiny, crowded room in a Madison Street high-rise building in the heart of the Loop.

The uniform is Polo shirts, khakis and sneakers. Many have just come from the Cook County Sheriff’s foreclosure sale a few blocks away on Wacker Drive. The room is so crowded that a couple of the men sit on the floor or stand along the wall. A few greet one another and wait, typing impatiently on their Blackberries. It’s time for the foreclosed property auction, run by privately-held Intercounty Judicial Sales Corp., to begin.

The top half of the door opens and the auctioneer appears. He starts calling off codes: “08CH-12348,” “08CH-10249,” “O8CH-30596.” The trail of numbers seems endless. The men quickly put on their bifocals, pull out their pens and start following the matrices of their print-outs, line by line. Finally a hand goes into the air, and the auctioneer raises the bid.

“179?”

“180,” a bidder responds.

“180, once. 180, twice. 180, sold.”

This scene is playing out in every major city across the country. Investors such as these in Chicago, scout foreclosure auctions hoping to pick up undervalued properties. But of the roughly 30 properties that go to auction on this day, only two to three are sold. That’s one sign that the fundamental problem of too much supply and not enough demand is continuing to plague housing, despite recent optimism over a slight rebound in home prices.

In fact, experts say, foreclosures are increasing nationwide and there’s an eight-month backlog of new homes waiting to be sold, neither of which suggest an imminent end to the pain of the worst housing crisis since the Great Depression.

“There is a flow of foreclosures that will continue for another six to nine months,” said Tassos Malliaris, a professor of economics and finance at Loyola University Chicago.

Simply put, people who lose their jobs can’t pay the mortgage. In Illinois the jobless rate stands just above 10 percent, the highest in 26 years, according to the Illinois Department of Employment Security.

“When home prices started dropping, regardless of whether individuals lost their jobs, they had no incentive to stay in their home because they had no equity,” said Malliaris. “Now, it is at the point where it is hitting people who have some equity. People have no jobs and they have not found any new jobs.”

By 2011, 48 percent of all mortgages will be “under water,” the term used to describe mortgages that are greater than the value of the underlying property, according to research from Deutsche Bank Securities Inc. A homeowner in this situation cannot sell the house in order to cover his debts.

“For many, the home has morphed from a piggy bank to an albatross,” research analysts Karen Weaver and Ying Shen both noted to Medill News Service. “The questions now are, how will this wealth destruction drag on consumption and how will outsized mortgage burdens be resolved?”

The answer may be in the numbers. In Illinois, there were more than 15,000 foreclosure filings in July, a 63 percent increase from July of last year, reports RealtyTrac.com.

Jalyne Strong, chief deputy clerk of public information for the Cook County Circuit Court Clerk’s Office, explained that after a brief lull, foreclosure activity has surged recently. “Case filings are now climbing back up to the levels they were at beginning of the year,” she said.

In 2008, there were more than 43,000 foreclosure case filings in Cook County and the projected number for 2009 is only slightly lower about 42,000. Nationally, the Mortgage Bankers Association has reported that homeowners fell behind in their mortgage payments at a record pace in the second quarter. Loans overdue by at least 90 days were also at a record high of 7.9 percent of all mortgages, according to the association.

Loyola’s Malliaris, however, said he believes the worst in unemployment may be over and that as a result, housing conditions should improve in the coming year. While the national unemployment rate hovers at 9.4 percent, the number of job losses seems to have slowed. In July, non-farm payroll employment dropped by 247,000, an improvement from June’s revised 443,000 drop, according to the U.S. Bureau of Labor Statistics.

But not everyone agrees.

“There is no magic that is going to change the borrower’s circumstance,” warned Mark Goldman, a mortgage broker and real estate lecturer at San Diego State University. “I think we will see more home auctions as people lose their jobs. It’s going to be harder and harder for people to make their mortgage payment and it’s going to put people in a sale.”

In Chicago, foreclosure auctions ballooned to 9,947 in 2008 from 2,905 in 2006, reports the Woodstock Institute. But as the number of foreclosure auctions shot up, fewer real estate investors were stepping up to buy. In 2008, investors acquired just 2.5 percent of the foreclosed properties auctioned in Chicago, a sharp decline from the 29.5 percent bought by investors just three years prior.

Real estate experts cite the likely poor condition of the properties, access to mortgages amid tougher eligibility requirements, and a smaller pool of investors with less cash in hand as factors inhibiting the number of foreclosed homes sold at auction.

Also, the foreclosure auction is often the last stop for a property, after the lender has attempted a short sale – meaning a bank has discounted the loan owed on the property in order to secure a sale.

“When it gets to foreclosure, value is not there,” said Thomas FitzGibbon, executive vice president of MB Financial Bank NA, noting that 34 percent of home sales in the first quarter in Chicago were short sales. “Someone has already tried to do something else.”