Jumping off from that part of the Times story, we’re likely to see a landmark shift in the living patterns of Americans if the high price of getting places continues—and who thinks it’s going to go down much? Bloomberg takes note of this in a story on how gas prices are hurting consumer wealth by reducing the value of houses in far-out suburbs.
Emerging suburbs and exurbs—commuter towns that lie beyond cities and their traditional suburbs—grew about 15 percent from 2000 to 2006, nearly three times as fast as the U.S. population, as Americans moved further out in search of more affordable houses or the bigger ones that are sometimes derided as McMansions.
“It was drive until you qualify” for a mortgage, says Robert Lang, director of the Metropolitan Institute at Virginia Tech in Alexandria, Virginia. “You can’t do that anymore. Your cost of transportation will spike too much.”
That’s the Quote of the Day.
Reading the bond leaves
The Journal on C1 says that bond prices across the world are signaling rising economic distress, something that could knock out “an important prop from under the stock market” (and, we’d add, the broader U.S. economy, which has been shored up somewhat by rising exports).
In Europe, long-term bond yields are below short-term yields, a rare occurrence called an “inverted yield,” which almost always precedes an economic downturn as investors flock to the safety of long-term bonds. But in Asia, bond yields are signaling worries about inflation, the paper says.
This reflects the tug of war at work in the global economy. Many developed economies are still hurting because of the collapse of real-estate markets and the credit crunch. Wednesday the Eurostat statistics agency said retail sales in the 15 countries that share the euro fell in April for the third straight month, surprising analysts who had been predicting an increase.
On the other side of the divide are the strong-growth emerging economies whose demand for raw materials and energy has driven prices higher. They are now seeing the challenges of that boom. In India, the government last week was forced to increase retail prices of fuel products. The result, analysts say, will likely be upward pressure on the country’s lofty inflation rate, which could lead to higher interest rates and ultimately slower growth.
Housing crisis? What housing crisis?
The Washington Post reports on D1 that the housing bust be damned! You can still buy homes with no money down with money from government-sponsored enterprises Fannie Mae and Freddie Mac.
Never fear, these borrowers have to go to “homeowner education” programs. It gets even better, the two allow some borrowers to get up to 105 percent financing by adding a piggyback loan to the mortgage.
Fannie Mae mentioned the continued availability of 105 percent financing last month in a news release announcing that it was abandoning a policy that required extra down payments in markets where home prices were declining. The company’s new policy allows buyers to borrow up to 97 percent of the purchase price with conventional mortgages.
Even as it eased the requirement, Fannie Mae said in the news release that down payments “are a critical success factor in homeownership.”
Hold nose, take money
The Journal says on its Money & Investing front that Lehman Brothers is going to get that big infusion of capital—more than $5 billion in total, including some from the state of New Jersey’s pension funds.
It also wonders somewhat incoherently (next to a story about who’s bailing out a bank with $5 billion) in a separate C1 column who’s going to rescue the banks next. Lots of the private-equity and sovereign-wealth funds that poured into banks and investment banks over the last several months have seen their investments decline big time. It raises the possibility of “Algeria, Angola, Libya and Zimbabwe” as well as Kazakhstan.
Selling stakes to funds of authoritarian or unstable regimes in frontier markets doesn’t quite mesh with Wall Street’s lofty image of itself. But it created this mess, and beggars can’t be choosers.
The Times on C1 looks at the weird story of a former AOL chief financial officer who blew the whistle on that firm’s fraudulent activities early this decade but is now being charged by the feds with financial fraud, along with seven other former executives.
The Times seems to come down on the side of the former exec, Joseph A. Ripp, quoting a litany of former colleagues and even prosecutors saying he was upstanding and was the “white hat” in the matter. The former editor in chief of Time Incorporated calls the charge “almost Kafkaesque.”