Heard on NPR today that S&P warned investors about some newly popular kind of crazy mortgage where the homeowner gets to choose each month how much he pays, and, if he pays less than the normal mortgage amount, the extra is added to his mortgage. And I thought interest-only loans were a sign that mortgage companies had gone out of their collective minds!

Also read that in D.C., 50% of all loans this year are interest-only. When (if?) prices decline sharply, I feel sorry for whoever owns these loans, because some decent fraction of the mortgage holders are going to walk away from their six-figure paper losses, either because they can't afford the adjustable-rate increases, or simply because they'd rather saddle someone else with their loss.

And federal regulators are starting to put pressure on banks and mortgage companies to rein in their wild loans.

Finally, there is www.condoflip.com, launched in Miami (where 80% of condos are being bought by speculators), and coming soon to a city near you. Certainly a sign of the housing apocalypse.

Having missed out on the housing boom, I'd like to profit from the coming bust. LEAP puts on homebuilder stocks (which have increased by hundreds of percent over the last five years) seem very attractive to me. Which publicly traded builders are most exposed to the most overheated markets (Boston, Vegas, Miami, D.C., Boston, etc.?)

UPDATE: New York Times last week: "American homeowners have made a trillion-dollar bet that mortgage rates will remain near record lows for at least few more years ... Deutsche Bank analysis shows only about $80 billion, or 1 percent of mortgage debt this year will switch to adjustable rate based largely on prevailing interest rates; some $300 billion of mortgage debt will be similarly adjusted in 2006; portion will soar in 2007, with $1 trillion of nation's mortgage debt--or about 12 percent of it--switching to adjustable payments."