Giantaxe

It's not so much the terms of the loan but the fact that borrowers are betting on appreciation continuing at the rate of the past few years. If that doesn't happen (and I don't see how it can in the 'bubble' areas where the biggest profusion of interest-free loans have been taken out), they're likely not going to be able to re-finance into any sort of loan - they'll be upside down on their exisitng loan. I do agree that of course that's the borrower's fault, but the general health of the property market is going to suffer down the road as a result of the lax lending standards of the past few years that has allowed people to take such bets. There are very sound reasons why lenders traditionally have required both downpayments and loans to amortize.

Whereas in a lot of CA you won't get back through rent more than 50% of the interest, taxes, insurance and maintenance on a property you buy today. That probably tells you exactly how out of whack CA house prices have become in relation to rents (and incomes).