This article is about interest-only loans, and I have a thought or two about it.
There is something disingenuous about calling these loans "risky"--they are, but only if you're in a certain position. For the first-time home buyer, they're a great way to get into the market--and if that buyer is looking to stay put in a good area for a while, it doesn't really matter if the so-called housing bubble bursts on him.
Assume FTHB Jack gets a loan of $100,000 more because he went the interest-only route. This gets him a single family house in a neighborhood he otherwise would not be able to afford, in which he is planning on staying for 20 or 30 years. The housing bubble bursts and his house is re-appraised downward. Big freaking deal. As long as Jack can make his mortgage payment, he's fine--he wanted to LIVE IN THE HOUSE.
Now let Investment Greg be the owner of 6 houses in California, none of which he lives in. The bubble bursts, and the houses are suddenly too expensive to sell at the price Greg was trying to flip them. Greg loses hundreds of thousands of dollars. Greg still owns 7 houses. Do we feel sorry for Greg making it hard for people like Jack to buy? No, we don't.
The people that bubbles affect the most are the people best equipped to deal with financial crises.