This is a good point Alex. There are many reasons to blame for this insane market, but subprime is the scapegoat that’s taking the blunt of it. I was thinking the same things as I continually watch the media blame subprime for all of the housing markets woes. Most of the problems were created from a lack of lending standards. The standards have been eliminated across the board. There were many people using “creative” financing and it wasn’t considered subprime.

Whats funny, is it is still going on today. Last weekend while perusing threw the Press Enterprise, I noticed 3 large homebuilders that had either creative financing or “sample payments” on their particular developments. All the examples were based on 100% financing, and most included teaser rates, some are still promoting interest only. This was on Lennar’s 2 page spread. They are also still doing stated income on loans as well. Housing will slowly come down, but if there was a mandatory 20% cash down for buying homes again…. you would have at least 50% off of all homes within 6 months.

Some of the other factors:
-A really low fed funds rate for 5 years.
-The popularity of 100% financing and interest only(not always subprime) loans.
-Rampant speculation.
-Fear of getting priced out of the market.
-“I wanna make $100s of $Ks on my home too”
-Sheer stupidity.
-HELOCing to death to either stay afloat, or keep up with Jonses because housing never goes down.