January 18, 2010 Issue Posted January 7, 2010, 5:00PM EST

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Beam me up, Nexus One: Google is making a play for the iPhone crowd Robert Galbraith/Reuters

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Homeownership: Less Than Meets the Eye

Living in your own home—it's a cornerstone of the American dream. And the U.S. has long boasted one of the highest rates of homeownership of any country, thanks in no small part to tax breaks for mortgage borrowers. That rate climbed steadily for a decade on the strength of demographic factors and the availability of newfangled mortgage products, peaking at 69% toward the end of 2006. Since then, soaring unemployment and a wave of foreclosures have pulled down the rate by 1.7 percentage points, to its current level of 67.3%, as reported by the U.S. Census Bureau.

Yet according to "The Homeownership Gap," a paper from the Federal Reserve Bank of New York, official figures are overstated because they do not exclude owners whose homes are worth less than the outstanding balance on their mortgages. Separate out those folks—they are, after all, more like renters than owners—and in some cities, including Detroit, Las Vegas, Phoenix, and San Diego, homeownership rates are 25 to 45 percentage points below the reported figures, say the study's authors, Andrew Haughwout, Richard Peach, and Joseph Tracy.

The implications of these findings are important for the U.S. economy at both macro and micro levels. "Reductions in the homeownership rate may create a large set of residents who may be less invested in the long-run outlook for their homes and communities," says the paper. The potential result: a deterioration in the maintenance of the housing stock and potentially in the stability of neighborhoods. At the national level, look for the savings rate to rise as homeowners who are underwater now do their best to scrape together the money for a new down payment. (Federal Reserve Bank of New York)

—Edited by Harry Maurer & Cristina Linblad

The Eighth Wonder?

Dubai may be drowning in debt, but it still knows how to make a splash. The Jan. 4 opening of the world's tallest building was heralded by an hourlong fireworks and colored fountain display. Spectacular as the 2,717-foot needle-topped building may be, it's unlikely to distract from the emirate's troubles. The $1.5 billion extravaganza opened its doors at a time when local real estate prices are down 50%, with no recovery in sight, and Dubai is struggling to repay $90 billion in loans. Even the building's name is a reminder of Dubai's dilemmas. It was changed from Burj Dubai to Burj Khalifa in honor of the ruler of Abu Dhabi, Sheikh Khalifa bin Zayed Al Nahyan, who has spent $25 billion bailing out his profligate neighbor and may have to spend more in coming months.

—Edited by Harry Maurer & Cristina Linblad

Credit Suisse Gets Sued

Real estate developers are suing Credit Suisse (CS) and U.S. real estate firm Cushman & Wakefield for $24 billion, charging the defendants with racketeering, fraud, and other misdeeds. In a lawsuit filed on Jan. 3 on behalf of at least 3,000 investors, developers L.J. Gibson and Beau Blixseth seek damages related to now-bankrupt ski resorts in Montana and Idaho and equally posh properties in Las Vegas and the Bahamas. They say the defendants ginned up inflated appraisals and the bank then charged huge fees on loans, which spurred investors to leverage the properties perilously. If the resorts couldn't pay the loans back, Credit Suisse could assume ownership or sell them off. The bank and the real estate firm denied the charges.

—Edited by Harry Maurer & Cristina Linblad

The Optimism Meter: Will the Bulls Return?

The Meter clocked in at 52 on Jan. 5, up from 49 the week before but down from the high of 56 in late December*, as enthusiasm for U.S. equities waned and then returned. Investors expect the Standard & Poor's 500-stock index to be less volatile over the next 30 days, and only 14% of individuals are predicting a drop over the next 12 months. Developed by Bloomberg BusinessWeek using data from pollster YouGov, the Meter is a proprietary measure of sentiment and expectations, economic statistics, and market forecasts. It tracks shifts in outlook among individuals, professional investors, and economists about U.S. economic growth, jobs, equity markets, and real estate.

* Calculated using consumer polling, economic forecasts, and financial markets data; 0=lowest and 100=highest

Data: YouGov, Bloomberg BusinessWeek

For more, see Bloomberg BusinessWeek's Optimism Meter blog

—Edited by Harry Maurer & Cristina Linblad