A real estate bubble could devastate the Bay area, land of interest-only loans.
Thomas Sowell wonders if we are seeing a bubble in the housing market in this article from The Wall Street Journal. I tend to think the same thing, with prices rising as rapidly as they are and the appearance of speculative ventures such as "interest only" mortgages. As a rule, when speculation in a market reaches these kinds of levels you can expect that market to pull back rather dramatically. We saw it recently in the case of the tech bubble of the late 90s and it would not surprise me to see it here as well.
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