The interest only loans came after the boom was well under way. The boom started, initially, as a safe investment vehicle. Then when the rates hit bottom, first time buyers jumped into the market (I think there was actually some gov't incentive offered for first time buyers). The thing just began to spiral from there. Now that you can put rental properties into your IRA, a lot of people just feel safer investing in real estate, than the stock market.
Agreed.
Speculation can have a very dark side to it when dealing in intangibles, whether that is the stock market or for that matter beenie babies and collectibles. Ultimately intangibles are worth nothing until someone ponies up money for them.
Whatever the foibles from speculating on real estate can bring, it is a tangible and should have long term endurance.