I’m a novice at ths stuff but from what I hear in talking to people there are at least 2 reasons people go IO, both with a big potential to backfire:
1. You expect a significant riase before or right at the time rates reset. The problem here is obvious: what if you don’t get a raise, or worse you get laid off? And this really doesn’t consider the Fed rate increases.
2. I will just sell my house once the rates go up. This implies the buyer expects not to be able to afford it, and can just sell. The problem is the mindset at the time was prices would double every few years. We know that passed so now people may be forced to sell at a loss, because everyone else w/ an IO had the same idea and wants to sell too.
Throw in the tightened loan standards, leading to less buyers, declining prices, and rising defaults, IO loans from the last 3-4 years are a recipe for disaster, unless you find a sucker for a buyer or doubled your salary in the last 3 years.