Housing prices in the Bay Area (San Francisco area) continue to rise. They are rising much faster than people’s incomes, and are way out of wack when compared to how much you can rent property for (it’s cheaper to rent unless the crazy trend of rising housing prices continues).

Today in the WSJ there’s a piece in the OpEd page about this. Here’s some details of the bubble:

• In 2002, only 11% of the new mortgages in the Bay Area were interest-only mortgages.
• Today 66% of new mortgages in the Bay Area are interest-only mortgages.
• Nationwide, 10% of new mortgages were interest-only mortgages in 2002.
• Nationwide, 31% are now interest-only.

Can you say fully leveraged? In a very illiquid market like housing, it doesn’t take much change in the buyer to seller ratio to really effect the market dynamics.

And to those folks who thing housing prices can’t fall, just remember the early ’90s. You couldn’t sell your house even if it was in Palo Alto. Oh, and how about Tokyo in the mid ’90s? Property went into free fall.

The housing Ponzi scheme continues. It’s not going to be pretty when the next recession comes and/or interest rates really start rising.