Cagan is more optimistic than I am, but I wanted to show his viewpoint. I’m surprised by his comment that 13% of recent ARM buyers are likely to default. After home prices drop further and more equity is erased and the bulk of loan resets start, the 13% number is likely to rise very fast.
I did make a mistake. I thought he meant that 13% would default this year, and thus the other 87% would default later, but he means 13% are likely to default, ever. Sorry for not reading that properly, and thanks for pointing that out.
