Russia pushes European energy to the brink
Russia has stopped gas flow to Europe. The Nord Stream pipeline has been a key source of natural gas for decades, providing heat and electricity across the region. And the result of Russia’s actions are already being felt keenly in Europe - even before cold weather sets in.
- Plus, could zero-down mortgages close the racial homeownership gap?
- And, the California power grid struggles against more extreme heat.
Guests: Axios' Matt Phillips and Megan Rose Dickey; Logan Mohtashami, Lead Data Analyst for HousingWire
Credits: Axios Today is produced by Niala Boodhoo, Sara Kehaulani Goo, Alexandra Botti, Lydia McMullen-Laird, Fonda Mwangi, Robin Linn, Alex Sugiura, and Ben O'Brien. Music is composed by Evan Viola. You can reach us at [email protected]. You can text questions, comments and story ideas to Niala as a text or voice memo to 202-918-4893.
- Bank of America Tests No-Down-Payment Mortgages in Black and Hispanic Neighborhoods
- R.I.P. Europe's energy system
- Heat wave in West breaks records, threatens California grid
NIALA: Good morning! Welcome to Axios Today!
We’ve made it to Wednesday it’s September 7th.
I’m Niala Boodhoo.
Here’s what we’re following today: could zero down mortgages close the racial homeownership gap? Plus, the California power grid struggles against more extreme heat.
But first, today’s One Big Thing: Russia pushes European energy to the brink.
NIALA: Russia has stopped all gas flow to Europe. The Nord stream pipeline has been a key source of natural gas for decades providing heat and electricity across the region. And the result of Russia's actions are already being felt keenly in Europe, even before the cold weather sets in. The Euro has plunged to a 20-year low against the dollar. The UK's new prime minister's biggest first task is to help British households with their energy bills. And France is calling for voluntary cuts of 10% in energy usage or warning it may need to start rationing. Axios’ markets correspondent Matt Phillips is here to explain what exactly is going on. Hey Matt.
MATT PHILLIPS: Hey Niala, how’re you doing?
NIALA: Matt I guess the big question is can Europe survive this winter without Russian gas?
MATT: They're gonna have to find out, through some combination of cutting demand, capping prices, bailing out their various utilities. Germany is the most dependent because it gets most of its gas from Russia. You know, Germany is Europe's biggest economy, it has an industrial sector where large parts have been engineered basically along the premise of Russian gas being cheap and abundant for the foreseeable future. So this is a huge shock to the way its economy has been structured over the last few decades.
NIALA: What about other countries?
MATT: Well, the UK is an interesting one because they are more reliant on natural gas as part of their energy mix than Germany is.They don’t have as much storage capacity as Germany, and so they're really being forced to ride the market price, which is wreaking havoc. The main regulator of British energy markets for consumers, they've estimated that they could see prices rise as much as 80%, over the next few months. You know, they're already up a good 40, 50% from, from where they were in 2021. So, especially for people at the lower part of the income bracket, this is enormously painful and a giant political liability for anyone who's trying to remain in power.
NIALA: And what does all of this mean for the European economy?
MATT: It's not good. Tuesday, we had a major French aluminum company announce that they were going to cut production by over 20% by the end of the year. That has implications for employment and for overall economic activity. It's not good when we've seen Europe-focused economists marking down their expectations for growth pretty sharply in both the UK and the Euro zone.
NIALA: Is there any sense of when Russia might restart this pipeline?
MATT: Well, they say once the sanctions come off, they'll restart it. The strategy that most analysts think Mr. Putin and the Russians are pursuing is that, by inflicting maximum amount of pain on European economies this winter, there will be able to break European solidarity and support for Ukraine. And hopefully that doesn't happen.
NIALA: Axios markets correspondent Matt Phillips. Thanks, Matt.
MATT: Thank you.
NIALA: One more European energy update:
Remember the Zaporizhzhia nuclear power plant? Well the world got its first independent look at the condition of Europe’s largest nuclear power station, with a report from the International Atomic Energy Agency yesterday. Zaporizhzhia was seized by Russian forces at the beginning of the war - but Ukrainian engineers are still operating the facility. International inspectors found damage to a building that stores radioactive waste and nuclear fuel, and said the shelling should be stopped immediately. Both Russia and Ukraine have blamed each other for the shelling.
At an emergency meeting of the UN yesterday, top Security Council officials called for a demilitarization of the area in and around the plant, and said military from both sides need to leave the facility.
In a moment: the pros and cons of the zero-down mortgage.
Could zero-down mortgages close the racial homeownership gap?
NIALA: Welcome back to Axios Today, I’m Niala Boodhoo! 44% of black Americans own their homes compared to 72% of white Americans. That's according to the National Association of Realtors and that's nearly a 30% gap and it's widening. For Hispanic buyers the gap is nearly 20%. Now, a new pilot program by Bank of America is offering first-time buyers in black and brown communities zero down mortgages. HousingWire lead data analyst Logan Mohtashami is here to explain. Logan thanks for being with us.
LOGAN MOHTASHAMI: Thanks so much for having me on.
NIALA: So Logan, this program's being offered in Charlotte, Dallas, Detroit, LA, and Miami. How exactly is this gonna work?
LOGAN: It really actually is designed to hopefully, people that are paying somewhat equivalent to their rent if they can own a house, per the guidelines that are implemented, then they believe that that'll be a beneficiary to the household for a very long time. And I think that's the goal of this program is to target lower income households that always have kind of the issues of putting a down payment, having closing costs, you know, impounding your property taxes and insurance. So like all pilots, you really need to see how this works out within probably the a 6 to 12 month timeframe and then we'll see what the effects of it is.
NIALA: What do you see as the cons of this type of pilot program? Are there any reasons for concern?
LOGAN: So when a program like this happens, individuals that get this loan if they lose their jobs in a recession, have no selling equity whatsoever. And that's always the risk for zero down payment loans. And there's no real easy solution around this. Especially when we're, you know, there's a lot of, uh, concerns about the next job loss recession recently. So that would be my primary concern with this in any kind of program that has a very low down payment.
NIALA: So does this seem like a sustainable solution to help close the racial gap in home ownership in America?
LOGAN: I think the pro is if you can facilitate a fixed payment and the qualifications of the debt to income ratios that are the most key factor into housing, I think that can help close that gap. And then you also have to assume the risk of, uh, having a zero down payment loan. When you purchase a home and you have no equity in it, let's assume that you lose your job, you know, four or five months later. A lot of people who have so much nested equity, 30, 40, 50% loan to values on their on their homes, they can sell their homes in relative comfort and not be part of a foreclosure or a or a short sale. Somebody that just recently purchased a home with no down, they don't have that luxury.
NIALA: Were you surprised to read the Bank of America was doing this?
LOGAN: No, because I think we have traditional loans in the last 12 years that are somewhat catered to this. We have down payment assistance programs, the government has always believed that home ownership is the, what they call the forced savings, you buy a home, you have a fixed payment, you stay there for a long time. And then over time you naturally will build wealth in that regards, even if home values don't go up. So, this is one avenue that the government and banks feel like they can accomplish that.
NIALA: HousingWire’s, Logan Mohtashami. Thanks, Logan.
LOGAN: My pleasure to be here. Thank you.
The California power grid struggles against more extreme heat
NIALA: California declared a power grid emergency on Monday amid a historic heat wave that’s continuing to test the state's energy supply. Multiple bay-area cities broke records with temperatures in the triple digits on Monday. Yesterday Sacramento, the state capitol, hit a scorching 114 degrees. Axios local reporter Megan Rose Dickey lives in San Francisco.
MEGAN ROSE DICKEY: It's about 90 degrees right now. And my power went out about 30 seconds ago. So, it looks like I'm not supposed to be in an area where there are blackouts, but you know, the power is out. Hopefully not too many other people are affected right now. And hoping that, that we can get back on the grid soon.
NIALA: Megan’s power did come back on, but these problems are expected to persist throughout the week. And that’s in part because this heatwave is also hitting nearby states that could otherwise export power to California.
That’s all we’ve got for you today! You can reach our team by emailing podcasts at axios.com, you can message me on twitter, or you can text me at (202) 918-4893.
I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.
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