To be fair, this isn’t nearly as much of a boast as the original, but it still needs some busting. Under the Inman headline “Realtor questions value of interest-only real estate loans”, columnist Robert Bruss downplays the potential of a “financial foreclosure debacle”. According to Bob:

“…after the first 10 years, most of these [interest-only] mortgages are “recast” and become fully amortizing for 20 years. More likely, the borrower will sell the home and pay off the mortgage.”
“Interest-only mortgages allow first-time home buyers to get started building home equity. They are also ideal for home buyers who expect to stay in their homes less than 10 years.”
“I hope today’s versions of interest-only mortgages won’t have the same sad result that occurred during the Great Depression…Frankly, I’m not worried.”

Bob might not be worried, but we sure are. San Francisco inventories are already on the rise, and over the past couple of years, the majority of new Bay Area mortgages have either been interest only or adjustable rate. Now guess what happens when, as Bob points out is most “likely”, they all try to sell at the same time?
And understand that the only way holders of interest-only mortgages “build equity” is through speculation (i.e. increasing property values). Over the past quarter, median sales prices in the Bay Area have started to retreat. And never mind a down market, even a flat market can be disastrous for those who have banked on speculation to “build equity” due to transaction, maintenance, and carrying costs.
The fact that numerous buyers turned to interest-only or short-term adjustable rate loans for affordability reasons, rather than investment prowess (i.e. maximizing cash flow/tax deduction), is going to have a huge impact on the market. And not in a good way for those who have only recently entered the market.