Cagan said 1 million people WILL default

[woodrow]

In 2 years or less, PowaySeller will look like an Oracle.

 

I certainly hope so.  I enjoy her efforts and agree with most of her predictions re: the local RE market.  I've learned a lot from the discussions she's sparked by posting articles and analysis – so much so that my wife and I have put off buying until late '07/early '08 at the earliest.

But PS will still be wrong w/re: to her interpretation of the terms "at risk" and "expectation" – they are fundamentally different terms and are not to be used interchangedly in economic discussions.

 

 

[powayseller]

woodrow, I agree with you that “risk” implies a possibility, and not a certainty of occuring. Risk means a chance of it happening. I think Cagan misused the word in the story. So I took it in context: “masses of foreclosures leading to recession” cannot occur if only a “risk” exists of 19% of 7.7 million homes leading to foreclosure. Even if the entire 19% leads to foreclosure, namely 1.5 million, I don’t know if that would be enough foreclosures to cause a recession. How could we have “masses of foreclosures leading to recession” if 1.5 million loans only have a slight chance of defaulting? It just doesn’t make sense to me, still. Perhaps you can explain that, and then I’m happy to change my mind.

In the meantime, maybe Cagan can clear up for us exactly what he meant? That would settle it once and for all.

[North County Jim]

I think Cagan misused the word in the story.

Well that settles it. Cagan’s wording was poor.

Someone should write him and let him know how his poor choice of words caused some bad feelings here.

Any volunteers?

[woodrow]

I don’t think anyone can point to a specific number and say “that many foreclosures will trigger a recession”. Our economy is too complex and dynamic for a singular issue to cause a meltdown. Obviously, more foreclosures signal greater economic distress.

My biggest criticism of your title was that instead of using Cagan’s exact words you chose a more bearish term instead of accurately quoting Cagan. If you had quoted him accurately, there would be no criticism.

Now you are suggesting that Cagan misused the word in the story. Perhaps he did – we’ll likely never know. But what is more probable – that Cagan misused the word, or that you misinterpreted his quote in your haste to post another bearish article? Again, I’m on your side, and believe the market is in the process of tanking, but I’m inclined to believe that the author of the quote actually meant what he said in his quote, and not your interpretation of what you thought he meant to say. I think we’re overanalyzing the issue when we question what Cagan “meant”; why not just assume that he’s rationale and meant what he said? His quote is scary enough without turning it into a doomsday guarantee, which was my point the entire time.

[PerryChase]

For a little perspective, here’s an article on CNN.
What seemed a big number back then is taken for granted today.

http://money.cnn.com/2007/03/27/real_estate/subprime_losses_spike/index.htm

Subprime losses lead to drop in home ownership
Despite the mortgage industry’s claims to the contrary, an advocacy group says that subprime foreclosures will leave 1 million fewer homeowners.

By Les Christie, CNNMoney.com staff writer
March 27 2007: 4:28 PM EDT

NEW YORK (CNNMoney.com) — About 2.4 million holders of subprime mortgage loans made between 1998 and 2006 will lose their properties to foreclosure, according to a report from the Center for Responsible Lending, a non-profit policy and advocacy organization for home owners.

Worse, that will result in a net home ownership loss of one million households.

[Anonymous]

Great, so one million homeowners who never should have been homeowners in the first place will no longer be homeowners.

The beauty of all this, when the dust finally settles in a few years, is that those of us with professional incomes that didn’t buy real estate during the boom will move up at least one rung on the class ladder.

[anxvariety]

deadzone, if you really did short LEND and NEW – you are probably a few rung up already!

[Anonymous]

Not quite, the NEW shorts helped a little. To make the full jump up the social ladder, I am counting on a lot of people to become poorer at the same time that I get wealthier.

[powayseller]

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.

[patientlywaiting]

I searched for foreclosure and I ran into a gem from the past.

I think that we can all agree that the more pessimistic predictions have come to pass and have been surpassed by a big margin.

There was one poster who said he will delay his purchase until 2007/2008. I wonder if he did pull the trigger.

[patientlywaiting]

I searched for foreclosure and I ran into a gem from the past.

I think that we can all agree that the more pessimistic predictions have come to pass and have been surpassed by a big margin.

There was one poster who said he will delay his purchase until 2007/2008. I wonder if he did pull the trigger.

[patientlywaiting]

I searched for foreclosure and I ran into a gem from the past.

I think that we can all agree that the more pessimistic predictions have come to pass and have been surpassed by a big margin.

There was one poster who said he will delay his purchase until 2007/2008. I wonder if he did pull the trigger.

[patientlywaiting]

I searched for foreclosure and I ran into a gem from the past.

I think that we can all agree that the more pessimistic predictions have come to pass and have been surpassed by a big margin.

There was one poster who said he will delay his purchase until 2007/2008. I wonder if he did pull the trigger.

[patientlywaiting]

I searched for foreclosure and I ran into a gem from the past.

I think that we can all agree that the more pessimistic predictions have come to pass and have been surpassed by a big margin.

There was one poster who said he will delay his purchase until 2007/2008. I wonder if he did pull the trigger.

[Author]

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