According to Credit Suisse, “on a trailing 6 month basis, roughly 700,000 homes have entered foreclosure based on Realty Trac’s data”. Some of them may be cured, but the foreclosure rate for the US is 1%! The top 10 foreclosure rates range from 1.4% to 2.7%, and do not even include CA.
I realize why Cagan is so optimistic, after a recent conversation with him. He assumes that prime borrowers have loans at 30% DTI, and did not take on teaser rates; thus their resets will be relatively minor and their low DTI will allow them to take on an increase in payments. I asked him where he got the 30% DTI for primes, since CTLV is not reported, and 70% of all loans in the last few years were not fully documented, and he could not cite any reason. So I now think that Cagan is not reliable in his analysis. The better analysis is by Credit Suisse’s homebuilding team, led by Ivy Zelman.
