Interest Only Loans Could Sour Market

The Arizona Republic reports that interest-only loans accounted for more than one in three home loans funded in Arizona during the first three months of 2005. In 2000, only one out of every 100 home loans were interest-only. Some are concerned that these loans could hurt our real estate market if there is a drop in home prices or if appreciation slows. In areas where appreciation on homes is rising rapidly, such as Phoenix, interest-only loans are popular, as buyers try to reduce their payments. The concern is if there is a housing bubble and the affect these loans have on that scenario, "The Valley doesn't have a housing bubble that will explode. It will only deflate some," said Elliott Pollack. He said the demand for housing in the Valley now so far outstrips supply, it will take two years for any price appreciation to slow. More...