they also interviewed a recent buyer who used an I/O loan and said he expects home prices to drop in the future but wanted to get into a house now with a bigger back yard.

What I really want to know for California is how many illegal immigrants have purchased homes with stated income interest only loans. They are basically buying call options on real estate instead of paying rent. If the price rises, hallelujah we made some money. If the price drops, we walk away and go rent somewhere or go back to mexico.

We are in for a world of hurt when construction and landscaping which are tied to real estate begin to drop because they are major employers of illegals who have used the recent real estate boom to purchase homes of their own. I have nothing against trying to come up in the cash game but banks are opening themselves up to a world of hurt if they think they are going to be able to recover the full principal by selling reposessed homes in a down market.