With Christmas behind us and the new year nearly upon us, I spent some time this week thinking about what next year will bring: presidential politics.
The first voting will start Thursday and end Nov. 4, when we pick the next president of the red, white and blue.
By Thursday night we should have a better idea who will be the Democrat and Republican nominees for president. Iowa, with a population less than Orange County, will hold its caucuses in living rooms and meeting rooms across the state that day. How Iowans vote will have an enormous impact on the race.
On the Democrat side, which has become a three-way tie in Iowa within the margin of error, according to the average of all polls followed by RealClearPolitics.com, a Hillary Clinton victory would help push back Barack Obama’s surge and could end the John Edwards campaign unless he gets second place. An Obama win bloodies Clinton’s nose but doesn’t cause any real damage unless he wins five days later in New Hampshire.
An Edwards win could change everything. After seven years out in the desert, the Democrats want the White House back and will pick whichever candidate they think can take it back in November. If anything, they are pragmatic.
With Clinton’s very high negatives among many general election voters and Obama’s lack of any real experience, Edwards may get the nod as the only top tier candidate who is smart enough and likable enough to win the White House in November.
First, a full disclosure before we talk about the Republican side. I drank the Kool-Aid for former Massachusetts Governor Mitt Romney more than a year ago after meeting all the top candidates except Fred Thompson. Thompson wasn’t a candidate then and, even with the hard work and help of some of my close friends, is not much of a candidate now. I have given and raised money for Romney and I am completely biased.
On the Republican side you have former Arkansas Gov. Mike Huckabee rocketing to the lead from nowhere to pass Romney by five points in Iowa.
A win by Huckabee would propel his candidacy past his certain-loss in New Hampshire where his southern charm does not wear well. Then into Michigan, where Huckabee is already neck and neck with Romney and on to the Bible-Belt South Carolina, where he is expected to win.
Romney will need every bit of his organizational skills and a perfect execution of his plan to win in Iowa. A second-place finish would not end his campaign if he turns around and beats McCain in New Hampshire, but it would leave a mark.
McCain has to win in New Hampshire to continue. Though loved by many Americans for his service to this country, his maverick style has never been something Republicans have warmed up to.
Former New York Mayor Rudy Giuliani is another candidate that I have a lot of good friends working hard to get elected. He has watched his poll numbers drop in every early state caucus or primary where voters have had a chance to see him up close. The campaign continues to say it has a “Big State” campaign and it is ahead in many of the Feb. 5 primaries, where 19 states including California, Colorado, Illinois and New Jersey choose their nominee.
The problem with this strategy is that by Feb. 5 you will have had seven major contests in four weeks. All eyes will be on the winners of the previous contests. A goose egg in every win column, for all intents and purposes, will end Giuliani’s campaign by the time we vote here.
My best guess: Romney will pull off a win in Iowa and New Hampshire (I told you I was biased) on his way to securing the Republican nomination. Republicans want a real executive in the White House.
The Democrats will go with Edwards if he wins Iowa, otherwise it will be Hillary vs. Romney in November. This is going to be a very long year.
Friday, December 28, 2007
Friday, December 21, 2007
Prop. 92's Fans Need Education
The people pushing Proposition 92, a.k.a. “Community College Governance, Funding Stabilization, and Student Fee Reduction Act,” must think that the public is deaf, dumb and blind if they really believe they can hoodwink the electorate into amending the California Constitution to, in their words, “stabilize funding” and lower student fees $5 per unit for community college students. They are, in fact, just lining their own pockets.
First off, if anyone decides that without the $5 per unit reduction in fees, they cannot afford to go to a community college then please don’t go! The good citizens of California are already giving you a $5,500 gift for your future, and if you do not think the extra $75 bucks per semester (full time) is worth it, then maybe we shouldn’t either. The student fees going full-time is $320 per semester. Not only will the state taxpayers completely subsidize your education, but if you really do not have the money, the feds will give you a grant to pay your fees and books.
There is no reason why anyone, no matter how poor, cannot afford a community college education. Try this — you can pay for your complete education by just brewing your coffee at home and passing on your daily Starbucks (OCC has one on campus). It is just about choices.
Before anyone says that I am just bagging on our local Coast Community College District, I am not. I may not agree with them when they basically gave away a $32 million TV station to a bunch of wealthy donors. But that only speaks to how they value taxpayer resources. I do not want to mix the good mission of the States Community College system with how some of the districts handle their finances.
With that being said, the fact that they now want the citizens of California to change the State Constitution so that they can forever lock in an ever-increasing percentage of the state treasury with no accountability is a bit more than this former community college student can take.
This Constitutional Amendment not only locks in a fixed percentage of all state revenue; it would also reallocate the revenue not by how many students the college has or how many courses the students take. No, they actually changed the definition of “changes in enrollment” to mean “the change in the population served by the public community colleges.” What that means in English is that if half the students at OCC did not show up next year, they would still receive the same amount of funding from the state as long as the population of the area served has not gone down.
Another disingenuous part of this Constitutional Amendment is where it states, “Community Colleges should be accountable to taxpayers through the election of local boards facing regular elections.”
It then proceeds to create a brand new state bureaucracy, “The Board of Governors of the Community Colleges.” By this amendment it would require that the majority of this board be composed of people who are either employees, faculty or administrators of the college system they are entrusted to govern. It also adds a new chancellor and six deputy chancellors. That is called the fox guarding the hen house.
I could go on more, but I am feeling charitable with it being Christmas and all.
All in, California spends more than $17 billion for its community college system. On balance, with the need for lifelong learning, it has served the citizens well. Adding another layer of bureaucracy run by a un-elected unaccountable insiders is not a class we need to take.
First off, if anyone decides that without the $5 per unit reduction in fees, they cannot afford to go to a community college then please don’t go! The good citizens of California are already giving you a $5,500 gift for your future, and if you do not think the extra $75 bucks per semester (full time) is worth it, then maybe we shouldn’t either. The student fees going full-time is $320 per semester. Not only will the state taxpayers completely subsidize your education, but if you really do not have the money, the feds will give you a grant to pay your fees and books.
There is no reason why anyone, no matter how poor, cannot afford a community college education. Try this — you can pay for your complete education by just brewing your coffee at home and passing on your daily Starbucks (OCC has one on campus). It is just about choices.
Before anyone says that I am just bagging on our local Coast Community College District, I am not. I may not agree with them when they basically gave away a $32 million TV station to a bunch of wealthy donors. But that only speaks to how they value taxpayer resources. I do not want to mix the good mission of the States Community College system with how some of the districts handle their finances.
With that being said, the fact that they now want the citizens of California to change the State Constitution so that they can forever lock in an ever-increasing percentage of the state treasury with no accountability is a bit more than this former community college student can take.
This Constitutional Amendment not only locks in a fixed percentage of all state revenue; it would also reallocate the revenue not by how many students the college has or how many courses the students take. No, they actually changed the definition of “changes in enrollment” to mean “the change in the population served by the public community colleges.” What that means in English is that if half the students at OCC did not show up next year, they would still receive the same amount of funding from the state as long as the population of the area served has not gone down.
Another disingenuous part of this Constitutional Amendment is where it states, “Community Colleges should be accountable to taxpayers through the election of local boards facing regular elections.”
It then proceeds to create a brand new state bureaucracy, “The Board of Governors of the Community Colleges.” By this amendment it would require that the majority of this board be composed of people who are either employees, faculty or administrators of the college system they are entrusted to govern. It also adds a new chancellor and six deputy chancellors. That is called the fox guarding the hen house.
I could go on more, but I am feeling charitable with it being Christmas and all.
All in, California spends more than $17 billion for its community college system. On balance, with the need for lifelong learning, it has served the citizens well. Adding another layer of bureaucracy run by a un-elected unaccountable insiders is not a class we need to take.
Friday, December 14, 2007
Homes Are Not Piggy Banks
It is only 10 days before Christmas, and to some, what I am about to say will sound like Santa Claus but to others, Scrooge.
But sometimes you just have to say it like you see it. The real estate market, depending how you measure it, hit all-time highs in 2006-07 in the Newport Beach/Costa Mesa area. Homes had more than doubled in value in less than four years.
Now, sales activity has dropped off a cliff and won’t return until prices drop enough, across the board, to get first-time home buyers on the first rung of the housing ladder.
Looking at the data, we can see the average home in Costa Mesa’s 92626 zip code went from around $350,000 in 2002 to over $700,000 in 2006. Newport Beach’s 92660 went from an average of about $500,000 to more than $1 million during the same period. More than a 100% increase in four years.
To get homes selling again, we need to understand how we got here in the first place. The increase in sales prices can be put at the foot of lenders who loaned people money to buy homes with no down payment and no verification of income.
To put it bluntly, if you could fog a mirror, you could get a loan. Welcome to Wall Street’s invention: the sub-prime loan.
In a market like Orange County, with very little supply, it does not take much increase in demand to rocket home prices up. With these sub-prime loans in hand, buyers bid up all available houses.
People will always bet with other people’s money if they have nothing to lose. Prices go up, I win; prices go down, the lenders lose.
If a buyer actually had to come up with a $20,000 or $30,000 down payment, they might not bid up home prices to where they could afford only the house with a temporary teaser rate that lasted long enough to move in. Prices were being forced up by people that had no skin in the game.
So now that sub-prime lending is over and buyers will actually have to pay for a house, prices will have to move down to what people can really afford.
This already happened in the new home market where builders have to sell homes for what people can actually pay in this post sub-prime market.
Take a look: New homebuilders are selling homes at 2005 prices. It’s a great time to buy a new home.
What about buying a resale home, which makes up most of our market? Do not waste your time trying to buy a home unless a seller is really motivated to sell.
For the most part, the only sellers who are really motivated have no equity and their lenders have agreed to accept less than what is owed on the house.
This is what is known as a short sale. Instead of foreclosing the lender, knowing they are about to have a loan go bad, decides it is better to take a loss now with an orderly sale than to have to go through the foreclosure process and end up with a vacant house, which they have to sell anyway.
Vacant houses do not show too well. Well that’s what happens when you loan 100% of the sales price.
Lenders have already written down $76 billion in real estate-related loan losses in 2007. But this is just an adjustment on their books, and until they foreclose or do a short sale, it will not be reflected in the home prices.
Home buyers can get only part of that $76 billion if they make an offer to buy, at a price they can afford. Call your local Realtor, you would be surprised what lenders will accept. Most large lenders have already staffed up their short sale departments, but be patient after you make your offer. This may take some time.
The reality is that more than half of the homeowners in the above zip codes paid less than the lower of those two numbers because they bought their homes prior to 2002. Many bought much prior and for a lot less.Whether you live in a $700,000 home or a $2 million home, most of you did not actually pay that much for your house. In fact, chances are you did not pay half of that amount.
The point I am trying to make is that the fluctuation in home value for most people should make no difference in their lives.
A home is a place to live. It is not a piggy bank. For those who bought their house after 2005 with no money down, you probably have no equity. But if you can afford your payments, pay down your loan and enjoy your home. You will be OK over the long term. Merry Christmas.
But sometimes you just have to say it like you see it. The real estate market, depending how you measure it, hit all-time highs in 2006-07 in the Newport Beach/Costa Mesa area. Homes had more than doubled in value in less than four years.
Now, sales activity has dropped off a cliff and won’t return until prices drop enough, across the board, to get first-time home buyers on the first rung of the housing ladder.
Looking at the data, we can see the average home in Costa Mesa’s 92626 zip code went from around $350,000 in 2002 to over $700,000 in 2006. Newport Beach’s 92660 went from an average of about $500,000 to more than $1 million during the same period. More than a 100% increase in four years.
To get homes selling again, we need to understand how we got here in the first place. The increase in sales prices can be put at the foot of lenders who loaned people money to buy homes with no down payment and no verification of income.
To put it bluntly, if you could fog a mirror, you could get a loan. Welcome to Wall Street’s invention: the sub-prime loan.
In a market like Orange County, with very little supply, it does not take much increase in demand to rocket home prices up. With these sub-prime loans in hand, buyers bid up all available houses.
People will always bet with other people’s money if they have nothing to lose. Prices go up, I win; prices go down, the lenders lose.
If a buyer actually had to come up with a $20,000 or $30,000 down payment, they might not bid up home prices to where they could afford only the house with a temporary teaser rate that lasted long enough to move in. Prices were being forced up by people that had no skin in the game.
So now that sub-prime lending is over and buyers will actually have to pay for a house, prices will have to move down to what people can really afford.
This already happened in the new home market where builders have to sell homes for what people can actually pay in this post sub-prime market.
Take a look: New homebuilders are selling homes at 2005 prices. It’s a great time to buy a new home.
What about buying a resale home, which makes up most of our market? Do not waste your time trying to buy a home unless a seller is really motivated to sell.
For the most part, the only sellers who are really motivated have no equity and their lenders have agreed to accept less than what is owed on the house.
This is what is known as a short sale. Instead of foreclosing the lender, knowing they are about to have a loan go bad, decides it is better to take a loss now with an orderly sale than to have to go through the foreclosure process and end up with a vacant house, which they have to sell anyway.
Vacant houses do not show too well. Well that’s what happens when you loan 100% of the sales price.
Lenders have already written down $76 billion in real estate-related loan losses in 2007. But this is just an adjustment on their books, and until they foreclose or do a short sale, it will not be reflected in the home prices.
Home buyers can get only part of that $76 billion if they make an offer to buy, at a price they can afford. Call your local Realtor, you would be surprised what lenders will accept. Most large lenders have already staffed up their short sale departments, but be patient after you make your offer. This may take some time.
The reality is that more than half of the homeowners in the above zip codes paid less than the lower of those two numbers because they bought their homes prior to 2002. Many bought much prior and for a lot less.Whether you live in a $700,000 home or a $2 million home, most of you did not actually pay that much for your house. In fact, chances are you did not pay half of that amount.
The point I am trying to make is that the fluctuation in home value for most people should make no difference in their lives.
A home is a place to live. It is not a piggy bank. For those who bought their house after 2005 with no money down, you probably have no equity. But if you can afford your payments, pay down your loan and enjoy your home. You will be OK over the long term. Merry Christmas.
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