Marc's Mortgage Matter's

Facebook...Facebook...Facebook...I guess the financial press is tired of discussing things like Europe's woes. (Even today's closing paragraph at the bottom is about Facebook.) Say what you want, but it is influencing real estate down in San Francisco: SFValues.

From a Garret Honcho buddy; My first cousin, Marty's daughter, is Debbie Lipmann, and last year I had dinner with her, her husband, Richie, and her two kids. It came out that Richie's real name was Richie Lipchitz, and as Debbie said, "I told him that I loved him and wanted to marry him, but I didn't love him enough to become Debbie Lipchitz." They arbitrarily chose the name Lipmann. Debbie's daughter is an advertising executive in New York, and when I asked her how she would have felt if her parents hadn't changed their name. "That's simple," she said. "I'd have gotten new parents."

More homeowners continue to reap benefits from the newly modified Home Affordable Refinance Program (HARP), with 79 percent of homeowners with government-backed mortgages either keeping the same level of mortgage debt as before or reducing it over the first quarter.

Of those homeowners, Freddie Mac found recently, 79 percent held onto the same level of debt for first-lien home mortgages, while 21 percent of homeowners shaved off dollars from their principal balance.

The mortgage company said that the share of borrowers keeping their original loan amounts hovered at the highest level in the 26-year history of the survey.

“The enhancements to HARP announced in October, such as removing the maximum loan-to-value limit, are beginning to show up in additional refinance

volume during the first quarter,” Frank Nothaft, VP and chief economist with Freddie Mac, said in a statement.

He said that HARP loans amounted to 20 percent of Freddie Mac’s refinance funding during the first quarter, with borrowers drawing down their interest rates by 1.5 percent on average.

“On a $200,000 loan, that translates into saving about $2,900 in interest during the next 12 months,” he added.

Freddie Mac also found that “cash-out” borrowers – those who increased their loan balances by at least 5 percent – accounted for 21 percent of refinance mortgages.

For those who reduced their 30-year loans, the median interest rate reduction amounted to 1.5 percent, representing roughly 27 percent in savings on interest rates alone, the largest such share in 27 years for Freddie.

Net dollars of convertible home equity translated to an inflation-adjusted low, a bottom for the company in about 17 years of analysis. Refinancing homeowners cashed out with about $5.3 billion in net home equity during the first quarter, down from $7 billion in the fourth quarter.

The latest numbers arrive as the Obama administration and lawmakers considers new modifications to HARP, with the president set to address the issue with a Nevada family interested in refinancing.

HUD Secretary Shaun Donovan indicated in a teleconference call with reporters Friday that the administration stands ready to back one of three bills currently before Congress that would expand HARP.

MP Note: Contact me ASAP for all available HARP options - avoid cold calls - spam calls and promises of eternal bliss for the masses.

Mortgages have become notoriously difficult to obtain, even among some of the most creditworthy borrowers, and lending standards are unlikely to be eased any time soon, according to Federal Reserve Chairman Ben Bernanke.

Ben Bernanke acknowledges that mortgages are harder than ever to obtain.

Bernanke, speaking at a Chicago banking conference last week, said that while banks have made significant progress in overall lending (taking into account other forms of finance such as auto loans and credit cards), they are consistently extra cautious with regards to mortgage finance. Lending standards have become so tough that even those with the cash to make a 20% down payment can face problems when trying to obtain credit on a home.

Acknowledging the problem, Bernanke was quick to caution that there should be no return to the days before the housing crisis, when banks were issuing mortgages to just about anyone who asked for one:

“A return to pre-crisis lending standards wouldn’t be appropriate. However, current standards may be limiting or preventing lending to many creditworthy borrowers.”

Numerous economists and real estate professionals have cited the difficulty in obtaining a mortgage as one of the biggest hurdles to cross if a full housing recovery is to materialize, reports Reuters.

According to US Housing Secretary Shaun Donovan, it’s estimated that around 10% to 20% of creditworthy buyers are unable to secure a mortgage due to the current tight lending standards at present.

The 15 Best Housing Markets For The Next Five Years

The 15 cities are ranked by the projected annualized change in home prices between Q4 2011 and 2016. We also included the median home price, median household income, unemployment rate, and the change in home prices since their peak to give a better scope of the housing market.

Note: Data median family income and home price data is for Q4 2011. Unemployment data is for February 2012, and population and households data is for 2010.

Santa Barbara-Santa Maria-Goleta, California

Home prices have declined 51.0 percent in the Santa Barbara-Santa Maria-Goleta metro area since they peaked in Q3 2005. The median home price is $266,000 which is much higher than the national median of $163,000.

The metro's 8.3 percent unemployment rate is in line with the national average, and it has a median household income of $68,800 above the national median of $63,000.

Port St. Lucie, Florida

Home prices have fallen 55.8 percent in the Port St. Lucie metro area since their peak in Q1 2006. It has an unemployment rate of 11.0 percent and a median family income of $51,700 that is higher than the national median.

The median home price in Port St. Luice is $130,000.

Modesto, California

Modesto home prices have dived 64.4 percent since their Q1 2006 peak, and the current median home price is $141,000, well below the national median of $163,000. But the city has an extremely high unemployment rate of 15.7 percent and a median family income of $54,800.

Sante Fe, New Mexico

Santa Fe's home prices have tumbled 17.1 percent since their Q4 2007 peak. It has a low unemployment rate of 5.8 percent and a median household income of $59,400.

Panama City-Lynn Haven-Panama City Beach, Florida

Panama City has a median home price of $138,000, and its home prices are down 42.0 percent from their Q1 2006 peak. The metro has an unemployment rate of 8.3 percent in line with the national average, and a median household income of $56,200.

Eugene-Springfield, Oregon

Home prices in the Eugene-Springfield metro area have slipped 21.2 percent since their Q2 2007 peak. The metro has an unemployment rate of 8.3 percent and a median household income of $53,300, which is below the national median.

Sebastian-Vero Beach, Florida

The Sebastian-Vero Beach metro area has a median home price of $135,000, below the national median, and home prices have declined 52.0 percent since their Q4 2005 peak.

At 10.8 percent, the unemployment rate is higher than the national average. The median family income of $58,500, is below the national median of $63,000.

Tucson, Arizona

Tucson's home prices have plummeted 45.8 percent since their peak in Q1 2006. The median price of a Tucson home is $142,000. It has an unemployment rate of 7.8 percent, below the national average, and a median household income of $57,200.

Bend, Oregon

Home prices in Bend are down 43.6 percent from their Q1 2007 peak. But Bend has a high unemployment rate of 11.3 percent and its median family income of $56,800 is lower than the national median of $63,000.

Deltona-Daytona Beach-Ormond Beach, Florida

The Deltona-Daytona Beach-Ormond Beach home prices have fallen 53.5 percent since their Q1 2006 peak, which could make it a good time to invest. The median cost of a home is $108,000 which is below the national median home price of $163,000. But the metro has an unemployment rate of 9.5 percent and a median family income of $55,100.

Ocala, Florida

Home prices in Ocala have plunged 52.1 percent since they peaked in Q3 2006, and the city has a median home price of $95,000. Ocala does however have a high unemployment rate of 10.4 percent and a median family income of $44,500, well below the national median.

Lakeland-Winter Haven, Florida

The Lakeland-Winter Haven metro area has a median home price of $105,000, and home prices have declined 55.8 percent since their Q2 2006 peak. At 10.2 percent, the unemployment rate is higher than the national average of 8.3 percent, and the median family income of $49,700, is below the national median of $63,000.

Napa, California

Napa has an unemployment rate of 8.2 percent and a median family income of $77,400, above the national average. It has a median home price of $330,000 and prices have fallen 51.7 percent since they peaked in Q1 2006.

Madera-Chowchilla, California

Madera-Chowchilla has a population 152,925 and a high unemployment rate of 14.4 percent. The metro has a median family income of $52,500 and its homes prices are down 53.1 percent from their Q3 2006 peak.

Medford, Oregon

Medford's home prices have fallen 37.1 percent since their peak in Q2 2006. The metro has a population of 204,822 and median family income of $49,700. At 10.8 percent Medford's unemployment rate is higher than the national average.

Read more: http://www.businessinsider.com/fiserv-15-best-housing-markets-next-five-years-2012-5?op=1#ixzz1vEmPU5pp

China and India may be tough competitors economically over the rest of this century, but there's one thing they will never beat us at, and that's Ridiculous Celebrity People. Whether it's Snookie, Kim Kardashian, or Cher Bono and her son Chaz (formerly Chastity, before undergoing a sex change), nobody even comes close. China will never outdo in this area. Cher is sporting an Oscar Gamble hair-style in this photo, and all in all, Sonny Bono must be turning over in his grave.

At my last bank, one of our best relationships was with a company that deposited their cash and coin in the night drop, and then sent over someone to count it in the morning. The guy who came to our counting room every day was maybe mid-50's with bad skin and one of those bulbous red noses that that makes you think of Ed McMahon. Anyway, he was gone for several months, and when he returned, he came back as a woman! Sadly for him, he went from being an unattractive guy to a homely woman.

Time Magazine had a lengthy piece on how the President went about the decision to attack Osama bin Laden, and whether you like or dislike him, he comes across as very analytical and thoughtful, constantly asking what could go wrong and what the backup plans would be. He was constantly questioning the advisors about Plan B or Plan C, and he insisted on what the generals called the "When the s__t hits the fan" scenario when everything goes wrong. Maybe he had read about the Bay of Pigs. Kennedy had been told two things I can recall: (a) We'll land the men on the beach and they'll march up to the road leading to Havana, and (b) once they march on Havana, there will be mass defections in the army, especially among the officers, and our guys will march triumphantly into Havana.

Two problems: (a) the beach was two miles from the road, and the men had to slog through a swamp to get there. While wading through the mud, the Cuban air force had an easy time picking them off. As for mass defections, Kennedy never once asked, "How do you know this? Have you spoken to the generals themselves? How many? Which ones?" He later blamed the CIA on this, saying he'd never trust them again, but the fault was as much his for not asking the key questions.

There are some who think you should take generals at their word, that they're the experts. House Speaker Sam Rayburn once told Kennedy, "Hell, if we can't trust the generals, we've sure wasted a lot of money on West Point." Maybe, but a great story is when Reagan was planning to invade the tiny island of Grenada. The generals all told him, "Mr. President, you have at least twice as many ships as we need," and Reagan looked up and said, "And if Jimmy Carter had had twice as many helicopters as he needed in Iran, he'd be sitting in this office, not me."

The message for all executives and decision makers: Probe, challenge, question, then do it all over again with someone else who wasn't in on the original meeting.

A resurgence of troubles in the Eurozone has driven mortgage rates to fresh "all time" lows. Investors continue to sell holdings of equities and stuffing those proceeds into Treasuries, cash and other safe haven investments, keeping downward pressure on rates. The Fed of course is also continuing to run Operation Twist, which also helps long-term rates to remain low.

Economically, the latest date present a mixed bag of news offering little clarity or suggestion of direction. Meanwhile, fantastically-low rates are at least causing some interest among potential homebuyers.

If the economy should falter, expectations are that the Fed will come to do more, either extending or expanding its supports for the economy. However, with just a handful of weeks to go, its not clear that the Fed has made any decision what to do just yet. To the extent that the Fed's present program has supported the economy, its expiry might tend to slow growth somewhat; that said, an extension or even a new program might have limited effect, with low rates and plenty of cash already circulating in the economy.

The minutes of the last Fed meeting in April were released this week, and while there seems to be some hopeful and even cautious optimism being expressed in them, a litany of challenges still face the economy. Overall, moderate growth at best is expected, firming to some extent as we go along, with waning inflation over time. With such an outlook, it seems unlikely that the Fed will start new programs when Operation Twist expires, but we still think a logical course of action will be for them to extend the program, perhaps until year's end.

For the most part, the economic math is pretty simple to understand: Weak economy plus cloudy outlook plus soft inflation plus euro-woes equals record low interest rates. Unfortunately, far too many borrowers either can't take advantage of them due to tight underwriting standards, property price issues or other difficulties, or are too uncertain about their prospects to make the commitment to buy a home. That said, with just a little additional upward momentum in the economy, we could very well find ourselves in a sweet spot for potential homebuyers and sellers.

When will that come? It's hard to say. To start with, we'll need to see unemployment moving downward and employment moving upward. Rents would need to continue to increase, making homeownership more compelling despite risks of value loss. And, yes, amid those conditions, mortgage rates would tend to be higher, but even if we moved considerably higher from here, rising 60, 70, even 100 basis points over a period of time, mortgage rates would still rank among the best of a generation or more, even if not at rock-bottom lows.

It will likely be a grind to get there, regardless. In the meanwhile, we will see if low rates in April had any effect on homebuying patterns as reports for both new and existing home sales are due out. Otherwise, a fairly light economic calendar will no doubt let markets continue to focus on Greece, Italy, Spain and other European economies and political systems. There's nothing to suggest any imminent increase in mortgage rates, but we think this week's fall may halt. Those sitting on the fence may do really well by calling me for a detailed anaylsis.

A Letter from Mark Zuckerberg - About Facebook's IPO. On the eve of Facebook's IPO, Founder and CEO Mark Zuckerberg published the following letter to potential investors:
Dear Potential Investor:
For years, you've wasted your time on Facebook. Now here's your chance to waste your money on it, too. Tomorrow is Facebook's IPO, and I know what some of you are thinking. "How will Facebook be any different from the dot-com bubble of the early 2000's?"
For one thing, those bad dot-com stocks were all speculation and hype, and weren't based on real businesses. Facebook, on the other hand, is based on a solid foundation of angry birds and imaginary sheep. Second, Facebook is the most successful social network in the world, enabling millions to share information of no interest with people they barely know.
Third, every time someone clicks on a Facebook ad, Facebook makes money. And while no one has ever done this on purpose, millions have done it by mistake while drunk. We totally stole this idea from iTunes.
Finally, if you invest in Facebook, you'll be far from alone. As a result of using Facebook for the past few years, over 900 million people in the world have suffered mild to moderate brain damage, impairing their ability to make reasoned judgments. These will be your fellow Facebook investors.
With your help, if all goes as planned tomorrow, Facebook's IPO will net $100 billion. To put that number in context, it would take JP Morgan four or five trades to lose that much money.
One last thing: what will, I, Mark Zuckerberg, do with the $16 billion I'm expected to earn from Facebook's IPO? Well, I'm considering buying Greece, but that would still leave me with $16 billion. LOL.
Friend me,
Mark Z.

Bankers Are Still Wrecking Housing Market Fundamentals 

by Abigail Caplovitz Field

Regardless of the recent bullish stories on the housing market, housing market fundamentals are lousy. Demand in the last decade was wildly distorted by banker abandonment of underwriting and appraisals. Now bankers are worsening the crash they created. As a result, prices will just keep falling, and foreclosures cannot lead to clearing the market (regardless of what some say). Foreclosures can only make the problems worse.

Market Distortion From Excess Demand in Bubble Years

As a first step to seeing the problems, let’s get real about how profoundly market-distorting that lender-inflated bubble was. People who could not afford to buy homes, period, were nonetheless given loans, artificially expanding the number of people expressing demand. In addition, people who could have afforded a house, if not the house they purchased, expressed their natural demand in the ‘wrong’ segment of the market. Both distortions combined to spike prices far higher than natural demand would have driven them.

To see the price spike, consider the median and average home prices, nationally, in 1976, 1986, 1996, and 2006, using August values in each year, in constant 2006 dollars:

1976 Median: $156,603 Average: $171,838
1986 Median: $168,306 Average: $208,221
1996 Median: $176,031 Average: $205,198
2006 Median: $243,900 Average: $317,300

That is, across twenty years the median home price increased by about $20,000 and the average by about $35,000. In the next decade–the bubble decade–the median and average prices each grew about three times faster. That’s more froth than Starbucks puts on its biggest latte. And it’s a strong signal of just how far prices have to fall to get to where natural demand would have pushed them.

Excess Supply

But the price peak isn’t the full measure of how far prices need to fall, because supply didn’t remain constant. The price spike drove home builders to add supply beyond what they would have to meet natural demand. This chart from the National Association of Home Builders shows that from 1978-1997 sales of new homes oscillated between approximately 0.4 to 0.8 million homes a year. For twenty years, demand pressure was never great enough to sell more than that in a year. From 1997 through 2007, however, sales went from about 0.8 million to nearly 1.3 million a year and back down to about 0.8 million. That’s 11 years of sales volume that dwarfed the preceding 20.

We’re seeing that part of the market correct, because in 2010 and 2011 more like 0.3 million new houses sold, and that’s roughly the pace this year. But it’s not obvious that three years of below normal sales is enough to balance out that decade of excess. Moreover, all those extra new houses are only one part–a relatively small part–of our current supply excess. Foreclosures have brought far more homes to market, and worse, have far more yet to come, than that new home bulge.

More Foreclosures (Supply) to Come

RealtyTrac data shows foreclosures are increasing again, after slowing down last year. In New York it looks like 100,000 new ones may be coming, based on notices sent in the first quarter of 2012 alone. They’re also on the rise in Pasco County, Florida. But you needn’t look at these stats to understand we’re nowhere near out of the foreclosure crisis yet.

According to the Federal Reserve, about 12 million people owe more than their homes are worth, and CoreLogic reports that falling prices mean their ranks include even new buyers. Being underwater is a strong predictor of default and foreclosure because when life happens (job loss, divorce, illness), the homeowner can’t sell to get out from under the suddenly unaffordable mortgage. In addition, some people will strategically default, like the very wealthy who don’t care about their credit, and people who can otherwise make it work for them.

And then there’s the millions trying to get their loans modified. Banks are forcing far too many of those people into foreclosure even when modification is in everyone’s financial interest. One of many ways the banks turn potential modifications into foreclosures is by wildly overvaluing the home, which skews the critical “net present value” calculation.

Banks Are Manipulating Inventory

Given the grim reality of too many houses at crazy high prices, how come we’re seeing a spate of good housing news stories? Well, those stories reported supply had shrunk so much, prices were rising. One of the most comprehensive was by Nick Tiramos for the Wall Street Journal, detailing that shrunken inventory was leading to some bidding wars in several markets. Local pieces, this Arizona Republic story, continued the theme. Both articles noted that the bidding wars didn’t mean prices had recovered much compared to the bubble years. Nonetheless, if the decreased inventory is for real, the optimism’s justified, right?

Too bad the inventory decrease seems artificial, the result of bank manipulation. Take Phoenix: RealtyTrac identifies 6,611 “bank-owned” properties there. An Arizona realty website lists only 275 for sale. Similarly, Yahoo real estate claims there’s over 8,000 foreclosure properties in Phoenix, but Realtor.com lists less than 4,000 homes of any type. AZHomeonline.net lists a bit over 4,000, plus 312 foreclosures and shortsales. So are the foreclosures in Phoenix on the order of 300 or 6,600? Makes a wee bit of difference when the non-”distressed” market is about 4,000, don’t you think?

(To Tiramos’s credit, his piece acknowledges the good news may not last because of the bank owned backlog; the more cheerleading articles don’t.)

Phoenix isn’t the only place where banks are holding properties off the market. In Portland, Oregon, banks aren’t selling 80% of the homes they own, The Oregonian reports. All the bank owned inventory statewide represents more than a year and half’s supply of houses all by itself, according to a RealtyTrac executive quoted in the piece. If the housing inventory is that distorted in Oregon, what’s it like in the hardest hit states?

By holding off inventory, the banks provide temporary support to prices, but for how long? The inventory will make its way to market–there’s just too many houses held in reserve for the banks to manage and maintain the properties in a market-price optimizing way. Moreover, this artificial control of inventory means foreclosures do not help a market to bottom; foreclosing cannot “clear” the market.

Where Will Future Demand Come From?

The last aspect of our housing market’s broken fundamentals is on the demand side. Specifically, who can buy a house now?

Not many young college graduates and their young families, normally the quintessential first time buyers. By 2008, over 200,000 young people had over $40,000 in student debt each, and given the explosive growth in debt, many more have that much now. In fact, the 1,781,000 students in the class of 2012 average over $25,000 each. Nope, young people won’t be buying homes for a decade or two. Millions of underwater homeowners can neither trade up nor down. Foreclosed former homeowners don’t have the credit or the cash to re-enter the housing market. In short, current and future demand for housing is likely to be substantially less than historically normal demand, even as prices keep falling and interest rates hover at historic lows. And that’s still true even if the job market comes back, not that there’s any sign of that.

The banks could substantially boost demand by writing all the underwater mortgages down to market value. People would be able to sell, and buy, and millions of foreclosures would be averted. But the chance the banks will take such drastic action is nil. Not essentially nil, like Powerball odds, but nil.

And nil is also the chance that housing is headed toward a broad based recovery, even if some local markets, unhampered by massive bank-owned inventory and large numbers of underwater homes, show sustained improvement.

Not only is the recent data disappointing, but the overhang of shadow inventories threatens to keep the housing market depressed for some time to come.

We’ll begin with a look at the data. Existing home sales were down 2.6% in March, the second straight monthly decline. Sales remain depressed, and are still 37% below the peak during the boom. The purchase index for the latest reported week was down 11%, and is down 15% from a year earlier. New housing starts dropped for the second consecutive month to a paltry 654,000. It topped out at 2,273,000 in January 2006. The NAHB housing index for April dropped back to its early January level. It remains at 25, compared to a peak reading of 70. The latest Case/Shiller report show year-over-year national average price declines of 4% To find anything encouraging in these numbers is quite a stretch.

In addition to the data already reported, it is difficult to be optimistic about the period ahead. Although the bulls talk a great deal about the decline in inventories of homes for sale, keep in mind that the official inventory numbers include only homes that are now on the market, and ignores the importance of the so-called "shadow inventories" that loom over the industry like the sword of Damocles. The shadow inventories include houses that are not now on the market, but are either delinquent on mortgage payments, in default, owned by banks or are in some stage of the foreclosure process. Estimates of the number of houses in this category vary anywhere between 2 million and 10 million.

Foreclosures have generally declined over the past year as a result of the well-known robo signing scandal that caused banks to voluntarily stop most foreclosures pending some kind of settlement. This has now been accomplished by an overall settlement between the states’ attorney-generals and the major bank mortgage holders. As a result, the significant number of potential foreclosures that were held back by the scandal will now begin to be processed and show up in future inventories. It is highly likely that the vast number of distressed houses coming into the market will depress prices even more in the period ahead.

Importantly, the shadow inventories do not include homes that are under water, but where mortgage payments are up to date. This group includes homes with mortgages that are now worth at least 5% less than the amount of their mortgage. About 25% of all homes with mortgages now fall into this category, and as prices decline even more under the weight of the shadow inventories, the number of underwater homes will increase, putting even more pressure on prices. Experience indicates that the more a mortgage is underwater, the greater the chances are that owners will stop maintaining their property and quit paying their mortgage.

The bullish argument that houses are now generally affordable also does not hold up on closer examination. As we have repeated ad infinitum the average household has too much debt and is in the midst of deleveraging rather than taking on more debt. Furthermore, households, on average, do not have enough cash for a down payment or a high enough credit score to qualify for the more stringent credit standards put into effect following the credit crisis. Neither do they have enough income. According to Ned Davis Research the ratio of median home prices to median household income is still about 5% above the 36-year mean. It is notable that following all bubble periods, ratios not only decline back to the mean, but fall significantly under it.

All in all, it seems that it will be some time before the massive number of actual and shadow inventories are cleared from the system. Until that happens, home prices will remain under continued pressure. (Which is rather good for buyers ;)

I used to eat a lot of natural foods until I learned that most people die of natural causes.

Whenever I feel blue, I start breathing again.

Situated on one side of one hole of the McDowell Mountain Golf Club, on a cul-de-sac, is a 3BR, 2 bath, 2,000 square foot home for rent for the price of $2,150/mo. On the other side of the hole, on a different cul-de-sac, is a 3BR, 2 bath, 2,005 square foot house for sale with an asking price of $310,000.

Our rental, which doesn’t have a pool, is across the street from a house that sits on the golf course: it seems to have a small back yard that backs up to another house. Our house for sale sits on the golf course and seems to have a very nice pool. Public records indicate the house for sale was last sold to its current owners for $696,000 in February, 2006 whereas the house for rent was last sold for $250,749 in Dec., 1999. I’ve never been to Scottsdale but a quick check of other houses suggests both prices are reasonable.

Some quick math shows that with a 30-year loan at 4% interest the nicer house, on the golf course, would yield a monthly P&I payment of $1,183.99 after a $62,000 down-payment plus closing costs. If a buyer qualifies for a 3-percent down-payment they’d have to raise $9,300 plus closing costs which would yield a monthly payment of $1,435.59.

There’s no ambiguity: even with taxes and insurance taken into account it costs much more to rent a mediocre home in the same neighborhood than to purchase a really nice house.

Though it isn’t marked as such the home for sale screams short-sale; it’s price has been reduced and it’s being sold “As-Is.” There’s a fine chance some servicer, after a dozen rounds of “lost documents” and chain-yanking, will seize and auction it to an investor with a bundle of cash for less than the $310,000 asking price. That’s less than half the price it fetched at the height of the bubble, who will then rent it for a tidy profit while waiting for prices to increase.

News articles have been appearing all over about investors paying cash for properties in bubble-states. Phoenix-area homebuyers squeezed out by investors, reads a piece in the Arizona Republic which notes that “cash is king.” In my own backyard, here in Florida, Miami condos have apparently appreciated 49% in the last year alone according to Bloomberg, which points out about 2/3rds of all buyers pay cash.

Irrational exuberance seems to be back in vogue in the bubble states, never mind shadow inventory figures so high that nobody can grasp exactly what they are. People, probably those kicked out of these same houses, are “willing” to pay a premium for rentals, which may make sense when one considers that even inflated rental prices are still less than their bubble-era mortgage payments.

One theme we hear repeatedly is a lack of “inventory,” homes for sale, which is predictably driving up prices. Remember all that talk about foreclosures driving up home prices? Apparently the foreclosure slowdown caused by Robogate instead seems to have done exactly what Adam Smith said it would leaving bankers, economists, and investors shocked — shocked! — at the recent gains in real-estate prices. Infamous Robosigner Linda Green appears to have done more to increase home prices than every government program combined leaving investors and home flippers, reckless villains in the meltdown narrative just last year, as this year’s heroes.

It’s not only private bankers doing this: government-owned but still “private” Fannie Mae and Freddie Mac are selling properties in bulk to investors. Brazenly ignoring their Congressional mandate to minimize losses by selling to the highest bidder (rather than the friendliest), while working to promote affordable housing, they instead work to empower and subsidize high-volume property flippers and land sharks.

These artificial increases are, of course, unsustainable. I have a friend who works for one of the local towns near me here in South Florida. He’s a city employee but with budget cuts worries about his job, part of which includes boarding up empty houses. Lately, however, the empties often aren’t empty.

It’s not uncommon, he says, to board up a needle-strewn empty one month only to be called back by police to board it up again a month or two later. Except that the new occupants aren’t crack dealers: they’ve often done the servicer’s work and cleaned it up. It’s not unusual, he says, to find that they’ve done basic repairs, and one even installed new appliances. OK – that was unusual; it seems the appliance installer rented the house from a random scam artist, paying a security deposit plus first and last month’s rent. Police, of course, will do nothing.

Banks are obviously manipulating the housing supply in an attempt to reignite a bubble to hide their losses, a strategy that’s temporarily working.

Book publishers were recently sued by the Dept. of Justice for price fixing, using similar practices. But I guess they’re not too big to fail. Indeed, I’m half surprised government hasn’t labeled book publishers a national security threat given the problems we’d face if people read and educated themselves about basic economics.

So here we go again. Backyard investors will soon be saying “it’s different this time,” arguing that those rents will never fall as they sink their retirement savings into the same houses that wiped out the retirement accounts of the previous occupants. But Mr. Smith’s invisible hand always wins in the end, sometimes with a gentle nudge and sometimes with a violent smack. There are too many houses for too few people and no private funding anywhere on the horizon. As long as those basic fundamentals hold true it’s not a question of if, but only when, the rental bubble bursts and how much damage it will inflict on everybody else.

By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick

One of the fun things about finally cleaning out the attic is finding things that once seemed important or profound. I recently came across a very old issue of "Rolling Stone" and skimmed through a Mick Jagger interview. The best part was his saying, "I'd rather be dead than singing Satisfaction when I'm forty five."

If your kids think that booze, cigarettes and drugs are cool, show them these before-and-after photos.

True Story regarding  HARP underwriting, someone wrote, "... I took an application for a borrower with a LTV (loan to value)of 105%. His mid-score is 725, his DTI (debt to income) is 40, he has owned the home for 3 years, and is at 6.50%. We are lowering his payment by $280. The loan is owned by Freddie Mac. He has never been late on a payment. He was declined. The reason: high credit card balances. You see, the borrower made a tactical error last year (though, in his mind an all-too-sensible one) by consolidating his credit card balances to two low-interest cards, pretty much maxing them out. He then closed out all of his other accounts (and I can see the wincing already). He thought it reflected a 'responsible' approach by limiting his exposure to greater debt. While I understand the issue his actions created, isn't this program supposed to help existing borrowers and reward them for their timely payments? Frustrated was just one of the words shared by the borrower (with some other non-printable ones thrown in as well)."

I agree - what a total farce. What a slap in the face to so many that have indeed kept their credit in check. Call me to discuss specific situations.

If you want to get the best possible price for your home, then you need to hire a good-looking realtor. However, if you want to sell faster and don’t care so much about the price, an unattractive sales rep is much more desirable.

The study, which goes by the impressively long title – “Broker Beauty and Boon: A Study of Physical Attractiveness and its Effects on Real Estate Brokers’ Income and Productivity” – found that real estate agents who are considered ‘physically attractive’ tend to sell homes at much higher prices than ‘less attractive’ agents do, on both the selling and the listing side. Researchers noted that ‘good looks’ seem to be twice as effective on the listing side when compared to the selling side.

Beauty of course, can be a very subjective thing – and so the authors of the study carried out a survey in order to rate the attractiveness of agents taking part in the study, before combining this information with their analysis of MLS data.

Interestingly, a real estate agent’s attractiveness doesn’t seem to have much bearing on how long the property is listed for sale. The study reports that pretty agents actually sell fewer homes than unattractive agents, something that suggests that while a good-looking agent is able to sell his or her listing for more, they are unlikely to earn more money for themselves.

The authors of the report came to the conclusion that attractive agents aren’t using their looks to sell properties, rather they just seem to be better at attracting listings that can be sold for better prices:

“Results suggest beauty augments more attractive agents’ wages and that more attractive agents use beauty to supplement classic production-related characteristics, such as effort, intelligence, and organizational skills,”

Is Our Long National Short-Sale Nightmare Finally Coming to an End?

Here's a table we put together of unrelated, un-correlated information.

By a whisker, mortgage interest rates eased to new record low levels this week, as neither the economy nor the Federal Reserve gave any indication that there is a reason for them to rise at the moment. The economic climate has turned considerably more mixed over the last two months, with rather more signs of deceleration than acceleration. It may be only a pause, but it is possible that modest growth may be all we can expect for a while to come yet. To be fair, the new record for rates is just a single basis point lower than the old, and there was little move at all this week.

y a whisker, mortgage interest rates eased to new record low levels this week, as neither the economy nor the Federal Reserve gave any indication that there is a reason for them to rise at the moment. The economic climate has turned considerably more mixed over the last two months, with rather more signs of deceleration than acceleration. It may be only a pause, but it is possible that modest growth may be all we can expect for a while to come yet. To be fair, the new record for rates is just a single basis point lower than the old, and there was little move at all this week.

y a whisker, mortgage interest rates eased to new record low levels this week, as neither the economy nor the Federal Reserve gave any indication that there is a reason for them to rise at the moment. The economic climate has turned considerably more mixed over the last two months, with rather more signs of deceleration than acceleration. It may be only a pause, but it is possible that modest growth may be all we can expect for a while to come yet. To be fair, the new record for rates is just a single basis point lower than the old, and there was little move at all this week.

As they have been, rock-bottom mortgage rates continue to do what they can to support the housing industry and improve household finances, but there are limits to how much support they can provide.

The Federal Reserve Open Market Committee met this week to discuss the economy and decide whether any present policies should be changed. No changes were expected, and none came; the only new light shed as a result of the meeting is that at least two more Fed Governors moved up their forecasts of when the first changes to the Federal Funds rate will occur. Formerly, there were two outliers who believed that 2016 might bring the first such move, but they seem to have now shifted into the 2015 camp, and others slid from the 2015 to the 2014 group. Since the Fed has stated on more than one occasion that it expects to keep rates low well into 2014, this came as only a mild surprise at best.

The Fed's Operation Twist comes to a close in just about nine weeks' time, but there was nothing in the statement which closed the meeting (nor in Fed Chairman Bernanke's subsequent press conference) to indicate that the program would be replaced, allowed to expire or extended, but only that the Fed stands ready to change policy if needed and as suggested by incoming data. As the warm start to 2012 has faded somewhat, that suggestion has moved from "less is needed" earlier this year to now somewhat more is warranted.

The calendar turns to May next week. As always, the first week of the month brings a slew of fresh data. Of note is a new Senior Loan Officer Opinion survey from the Fed, which will probably detail modestly easing lending conditions for businesses and possibly some in residential lending, too. Sales of new cars, the latest ISM indexes, income, spending and productivity reports all precede the employment report. For many of these, the April data seems likely to be just a little better than March was, but not enough to drive interest rates strongly in an upward direction. If the data is not much better (or not as good), some pressure on the Fed to "do something" is likely to start to grow.

Mortgage rates should be fairly flat again next week. Which still means very favorable rates prevail plus home prices are at their lowest. The two best scenarios still stand although it is tough to qualify yet many do, and you know who you are. Those that are still on the fence will do well to contact me.

In a crowded city at a busy bus stop, a woman who was waiting for a bus was wearing a tight leather skirt. As the bus stopped and it was her turn to get on, she became aware that her skirt was too tight to allow her leg to come up to the height of the first step of the bus.
Slightly embarrassed and with a quick smile to the bus driver, she reached behind her to unzip her skirt a little, thinking that this would give her enough slack to raise her leg.
Again, she tried to make the step only to discover she still couldn't.
So, a little more embarrassed, she once again reached behind her to unzip her skirt a little more.
For the second time, attempted the step, and, once again, much to her chagrin, she could not raise her leg.  With little smile to the driver, she again reached behind to unzip a little more and again was unable to make the step.
About this time, a large Texan who was standing behind her picked her up easily by the waist and placed her gently on the step of the bus.
She went ballistic and turned to the would-be Samaritan and screeched, "How dare you touch my body!  I don't even know who you are!"
The Texan smiled and drawled, "Well, ma'am, normally I would agree with you, but after you unzipped my fly three times, I kinda figured we was friends." 

In a crowded city at a busy bus stop, a woman who was waiting for a bus was wearing a tight leather skirt. As the bus stopped and it was her turn to get on, she became aware that her skirt was too tight to allow her leg to come up to the height of the first step of the bus.
Slightly embarrassed and with a quick smile to the bus driver, she reached behind her to unzip her skirt a little, thinking that this would give her enough slack to raise her leg.
Again, she tried to make the step only to discover she still couldn't.
So, a little more embarrassed, she once again reached behind her to unzip her skirt a little more.
For the second time, attempted the step, and, once again, much to her chagrin, she could not raise her leg.  With little smile to the driver, she again reached behind to unzip a little more and again was unable to make the step.
About this time, a large Texan who was standing behind her picked her up easily by the waist and placed her gently on the step of the bus.
She went ballistic and turned to the would-be Samaritan and screeched, "How dare you touch my body!  I don't even know who you are!"
The Texan smiled and drawled, "Well, ma'am, normally I would agree with you, but after you unzipped my fly three times, I kinda figured we was friends." 

A recent study conducted by TransUnion has revealed that, when faced with credit card, auto loan, and mortgage debt, the typical troubled borrower is most likely to let their mortgage payments slip. Four million indebted borrowers were surveyed (that's a lot of dinner-time phone calls!), and a mere 9.5% of those were delinquent on auto loans, while 17.3% were delinquent on credit card payments.  Nearly 40% of the borrowers polled were behind on their mortgage, opting instead to pay auto and credit card loans.

The President of PHH resigned last week "to pursue other interests." Does that mean he wants to spend more time working on his stamp collection? Why can't people just say, "I was fired" or "I resigned before the Board had the chance to fire me." And when the company talks about him, why do they have to always say, "and we wish him well" when they really mean, "... and we hope he burns in hell for losing all that money last quarter."

We were at bank recently that found out that one of their loan officers was secretly setting up his own mortgage company on the side. This was explicitly prohibited in their employment agreement, and they're thinking of suing the guy. You rarely see companies take it this far, but working on a side deal while taking a salary from your current employer is clearly unethical.

Airports are more than just a means of moving people or goods. They are a central component in urban and regional economic development.

Airports serve as key anchors of a new aerotropolis model of economic development, according John Kasarda and Greg Lindsay, that promises to “shape business location and urban development in the 21st century as much as highways did in the 20th century, railroads in the 19th and seaports in the 18th." Airports play a key role in "city connectedness," joining key hubs of the global economy, according to Zach Neal of Michigan State University. In fact, the terms "great city" and "port city" were synonymous until the 20th Century, as Peter Hall points out in Cities in Civilization.

Over the next few weeks, I'll be posting about airports, their locations and their effects on economic development. Today, I begin with a look at the key airport locations across the United States and Canada.

With the help of my Martin Prosperity Institute colleagues Charlotta Mellander and Zara Matheson, I used detailed data from the Airports Council International to track the geography of airport activity across major metros in U.S. and Canada.

The first map, below, charts metros by the total number of flights that pass through them. Los Angeles takes the top spot followed by New York, Phoenix, Chicago, and Atlanta.

The second map charts metros by the total number of passengers that pass through their airports. This map is somewhat similar to the first but not the same. New York takes the top spot here, followed by Atlanta, Chicago, Los Angeles, Dallas, and Miami.

But when we chart metros by the passengers they handle relative to their populations, or on a per capita basis, the results—and the map—are completely different. Now Charlotte, North Carolina, takes the top spot, followed by Las Vegas, Denver, Salt Lake City, Orlando, and Atlanta. Large metros fall much farther down the list, with Chicago in 17th place, Los Angeles in 34th, and New York in the 27th spot. Of course, some of this is because airlines pick their hubs based on location and cost as well population size. Charlotte, for example, is a hub for U.S. Airways. Millions of passengers pass through its airport without ever setting foot in (or spending money in) the city.

The fourth map charts metros by the total amount of cargo that passes through them. Now the rankings are completely different. Memphis, home to FedEx, takes the top spot, followed by Anchorage, New York, Louisville, Miami, Los Angeles, and Chicago. Again, this isn’t surprising. Aside from the largest metros, there is considerable specialization of airports in terms of those that handle people versus cargo. Also, cargo hubs are sited based on broad logistical considerations as opposed to the size of the local marketplace. FedEx didn’t choose Memphis as its hub because it delivered so many packages to neighborhoods near Graceland.

(from Buis.Week blog)

Housing Set for Spring Recovery as ‘Fear Factor’ Fades (CNBC)

Five years after the U.S. housing bust sent sales and prices plunging, the spring home-buying season is pointing to a long-awaited recovery.

Reduced prices, record-low mortgage rates, higher rents and an improving job market appear to be emboldening many would-be buyers.

Open houses are drawing crowds. A wave of foreclosures is leading investors to grab bargain-priced homes.

And many people seem to have concluded that prices won't drop much further. In some areas, prices have begun to tick up.

Interviews with more than two dozen potential buyers, sellers, brokers, Realtors and economists suggest that confidence is up and that sales will move slowly but steadily higher.

"The biggest challenge that we've had over the past four years is fear — fear that the economy is collapsing, that property values are collapsing, that the world is coming to an end," says Mark Prather, a broker at ERA Buy America Real Estate in La Palma, Calif. "The fear factor is all but gone."

Prather says the number of prospective buyers who contacted his company last month was about 35 percent more than a year ago.

The spring buying season got an early lift-off from an uncommonly warm January and February — a winter that was the best for sales of previously occupied homes in five years. Permits to build houses and apartments rose in February to their highest level since 2008.

"People feel much more confident," said Steve Brown, co-owner of real estate company Irongate Inc. of Dayton, Ohio, who says sales jumped more than 16 percent for the first two months of 2012 over the same period last year. "There's no question there's a good feeling in the marketplace."

Some analysts detected a slight uptick in prices for February and March. CoreLogic, a real estate data firm, says prices for homes not at risk of foreclosure — about two thirds of the market — rose 0.7 percent in February. It was the first increase in four years. Price gains occurred both in some hard-hit areas, such as Phoenix, and some still-thriving areas like New York and Washington.

In Miami, the average sales price has surged 14 percent in the past year, according to Trulia, a real estate data firm. In Phoenix, the average is up 13 percent, in Pittsburgh 9 percent.

Earnings reports Friday from two big banks suggested that more people are taking out mortgages. JPMorgan Chase [JPM  43.65    -0.25  (-0.57%)   ] issued 6 percent more mortgages from January through March than it did a year ago and got 33 percent more applications. Wells Fargo [WFC  33.48    -0.20  (-0.59%)   ] issued 54 percent more mortgages and received 84 percent more applications.

Still, few think the housing industry is nearing a return to full health. For that to happen, a robust job market would be needed. More hiring would give more people the money and job security to buy. That would help boost sales and prices.

Such areas as Atlanta, suburban Las Vegas and central California show few signs of recovery. And in some others — from Seattle to Cleveland — home prices have continued to slip. The average has dropped 9 percent in Seattle over the past 12 months and 7 percent in Cleveland.

But in many parts of the country, including thriving areas of Boston, Dallas and Seattle, confidence is rising along with prices.

Among the reasons:

• Hiring has strengthened. Each month from January through March generated a solid average of 212,000 jobs. Unemployment has sunk from 9.1 percent in August to 8.2 percent. More job security tends to embolden more people to invest in a home. In Dayton, for example, the University of Dayton is hiring for a new engineering research center, General Electric [GE  19.185    -0.155  (-0.8%)   ] is hiring hundreds of contractors and the nearby Wright-Patterson Air Force Base are expanding.
• Loans remain cheap. The average rate on a 30-year fixed-rate mortgage is 3.88 percent. That's just above the 3.87 percent reached in February — the lowest since long-term mortgages were first offered in the 1950s.
• Homes are more affordable. Nationwide, home prices are down 34 percent since 2006.
• Americans are more confident. The Thomson Reuters/University of Michigan's survey of consumer confidence rose in March for a seventh straight month to its highest level in 13 months.

Also fueling interest are signs that home values are finally stabilizing. One factor that had slowed purchases after the housing boom ended in late 2006 was fear that a home would lose value soon after its purchase.

But the price declines slowed toward the end of 2011, according to the Wells Fargo/Case-Shiller home price index. And CoreLogic says the average price nationally rose slightly in January and February.

"Unless prices went down, I don't think we would have ever been able to afford a home," said John Henschel, 37, an information technology consultant who will move with his family into a five-bedroom house in Wheaton, Ill., in May. "But we feel like prices aren't going to go back down. We're confident. So why not?"

When the landlord on their Chicago apartment told them he was selling it, Henschel and his wife decided it was time to buy. The home they bought for nearly $450,000 could have fetched more than $570,000 six years ago, according to housing website Zillow.com.

On a rainy Saturday this month in long-struggling Riverside, Calif., 12 families visited a three-bedroom house priced at $199,999. Ten others stopped by in the first hour of the next day's open house. By the end of the weekend, two buyers had made offers.

"We're seeing more buyer activity this spring than we've seen in probably four years," said Liane Thomas, the broker who was showing the house.

Prices in the area could rise in coming months because the supply of homes for sale in Riverside is down — from nearly 19,000 last year to 13,000 in February.

Many potential buyers are hunting for deals in places that were especially hurt by the housing bust. In Sarasota, Fla., which boasts wide sugar-sand beaches, condos are selling for an average of $325,000, compared with more than $550,000 at the height of the boom, said Marc Rasmussen, a broker.

Homes nearing foreclosure account for nearly half of all properties on the market, according to the Campbell/Inside Mortgage Finance HousingPulse survey. That compares with 10 percent in healthy economies. Many are receiving multiple offers because their prices have plunged.

In Phoenix, a foreclosed home offered for $77,000 that had been vandalized received 21 offers last month at or near the asking price — roughly the price it sold for. The average time a home sits on the market in Phoenix has dropped from 114 days last year to 90 days, according to the Cromford Report, a data research group.

In suburban Washington, D.C., Rory Obletz and his wife have been saving to buy after renting for six years. Obletz, 27, failed in two previous bids for single-family homes. He's hoping a third bid — about $10,000 above the asking price of $399,000 for a home in Silver Spring, Md. — will succeed this month.

"One home we went to, it was under contract by the time we walked out of the house," Obletz said. "If you really want to get something, you don't have a lot of time to think about it."

It isn't just bargain-hunting families seeking homes. Investors are increasingly buying single-family houses, fixing them up and re-selling them or converting them into rentals.

Investors are out-bidding many first-time buyers on cheaper homes in particular. Sales of homes between $100,000 and $250,000 have jumped nearly 19 percent over the past year. For homes between $250,000 and $500,000, sales are up 13 percent.

More expensive homes, from $500,000 to $750,000, whose sales tend to contribute the most to the U.S. economy, are up a smaller 6.7 percent.

For buyers seeking to move up to a bigger home or to relocate, the toughest challenge is often selling the home they're in.

According to CoreLogic, about 11 million homeowners are "underwater" — they owe more on their mortgage than their home is worth.

Yet for first-timers like Obletz, who have been saving and watching as homes have become more affordable, the time feels right.

"Rent is a little more expensive, and we have the money, so we might as well jump on it," he says.

Dartmouth just named their medical school the Geisel School of Medicine after Ted Geisel, class of 1925. Lots of medical schools are named after famous people, but Ted Geisel was the real name of Dr. Seuss. His kids' books are great fun, but if you're going in for major surgery, wouldn't you be a bit less confident knowing that the medical school was named after the guy who wrote Green Eggs and Ham?

Did you read how Chinese communist party big shot Bo Xilai was demoted a few weeks ago? Here's a quote from the WSJ: "But the naming of Zhang Dejiang, who studied economics in North Korea..." Say what?? What kind of economics could they possibly teach in North Korea?

If Karl Marx cared so deeply about the workers ("Workers of the world unite, you have nothing to lose but your chains...") how come almost all communist leaders have been murderous thugs? Remember recently departed

Kim Jong-Il of North Korea? When the population was starving a few years ago, he heard that some of the army officers were grumbling about the lack of food. He had them arrested and forced to lie on the parade ground on their stomachs, their hands tied behind their backs. He then gathered thousands of soldiers to watch as he had tanks roll over them. If we had been Friedrich Hayek's editor, we'd have made a slight change to the title of his famous work. We'd have called it The Road to Serfdom... and Murder.

Although the economy isn't back to "square one", mortgage rates are. Of course, that's to the benefit of homeowners looking to refinance and potential homebuyers shopping for homes. Whether they are able to or will respond to these recurring interest-rate opportunities remains to be seen, and will largely depend upon the economy continuing to recover. Unfortunately, it looks as though we have entered a economic soft patch, and that the kind of upward momentum needed to move us to "expansion" from "recovery" isn't happening.

Accumulating signs of slower growth started to appear some weeks ago. There's nothing to suggest any kind of hard stop for the economy, but the news has turned from solid in the early two months of the year to more mixed in the most recent two. The Fed has noted that growth in the fourth quarter of 2011 was "moderate" at best, but it seems to us that further moderation has happened in the first quarter of 2012. The initial report for 1Q12 Gross Domestic Product comes out next week, and it is a reasonable bet that the report will show a deceleration in activity to perhaps a 2.2% rate for the quarter.

The Federal Reserve meets next week to discuss policy. The meeting is a two-day affair culminating with a statement to be released on Wednesday. We expect no change to any policy, accompanied by an expression of some concern that growth has eased a little, employment gains have stalled, a notation that gasoline prices are high but their inflationary effects are transient, and that the Fed stands ready to support the economy further should conditions warrant.

While refinancing depends almost solely on low interest rates, homebuying is different. It essentially requires a number of things to come together in harmonious alignment, and usually relies upon factors not directly controlled by the purchaser, favorable interest rates, and available inventory among them. Weather is one of these factors, and the unseasonably warm winter for most of the US does seem to have stolen some sales from the traditional start of the spring homebuying season.

For wanna-be mortgage borrowers, disappointing economic news is music to their ears. Troubles in overseas markets have resurfaced and the economy here seems to be sputtering to a greater degree. A strong surge in stocks during the first quarter turned into a selling event to lock in profits, and at least some of that money which optimistically sought higher returns in riskier investments has again returned to the safety of bonds and Treasuries, pulling interest rates back down.

Will the tide of disappointing yet still moderate economic news continue next week? It seems to us that it will. Since the builders have already weighed in, a softer report on new home sales seems a given. We have already mentioned that we think GDP will come in with a downturn relative to the fourth quarter of 2011. There are a couple of other indicators including Consumer Confidence and Sentiment gauges which may nudge downward. If the Fed leaves any impression that it is more likely to move to support the economy (unlikely), we could see interest rates move upward. At the moment, though, and based upon this week's market activity, we don't seen much movement happening in mortgage rates for next week.

The Jury...

In a criminal justice system based on 12 individuals not smart enough to get out of jury duty, here is a jury to be proud of:

A defendant was on trial for murder.  There was strong evidence indicating guilt, but there was no corpse. In the defense's closing statement, the lawyer, knowing that his client would probably be convicted, resorted to a trick.

"Ladies and gentlemen of the jury, I have a surprise for you all," the lawyer said as he looked at his watch.  "Within one minute, the person presumed dead in this case will walk into this courtroom." He looked toward the courtroom door.  The jurors, somewhat stunned, all looked on eagerly.           

A minute passed.  Nothing happened.             

Finally the lawyer said, "Actually, I made up the previous statement.  But you all looked on with anticipation.  I, therefore, put it to you that you have a reasonable doubt in this case as to whether anyone was killed, and I insist that you return a verdict of not guilty."

The jury retired to deliberate.   A few minutes later, the jury returned and pronounced a verdict of guilty.         

"But how?" inquired the lawyer.  "You must have had some doubt; I saw all of you stare at the door."

The jury foreman replied:

"Yes, we did look,

But your client didn't."