And a bit more on speculation

"So how are people still buying houses in the face of increasing prices and interest costs?" you ask (and if you aren't, you ought to be). Ever-riskier financing arrangements, that's how. Adjustable rates, interest-only payments, balloons, low documentation, lots of sub-prime paper floating around. I swear there must be a bunch of underwriters having trouble keeping their rubber stamps inked.

What happens when interest rates go up? What happens if prices don't go up fast enough or (horrors) go down? A lot of people in a world of hurt, and I go back to the early days of my career and start doing bulk foreclosures and trustee's sales again (I won't be doing as much bankruptcy work this time, though. Bankruptcy protection has been severely curtailed, courtesy the recent bankruptcy "reform.").

On top of it all, adjustable rate mortgages will start getting bad just as people's other loan payments go through the roof, also courtesy bankruptcy "reform." Sounds like we may have a larger than usual Christmas hangover come January.