As noted, the article claims "Last year, 42 percent of America's first-time buyers - and 25 percent of all buyers - put no money down."
The first part, at least, is correct, see http://www.realtor.org/fedistrk.nsf/3921d4b155894b4f86257142005f7061/013f0cdb0f0bc12285257192005e24c7?OpenDocument
In 2005, 43% of first-time homebuyers financed 100% of their home.
It's important to understand the context of those numbers as shown in the rest of the paragraph:
55% of homebuyers who financed with a zero-downpayment loan in 2005, had incomes less than $65,000; 24% of those who used a zero-downpayment product were minorities; and 52% of people who financed 100% of their home purchased homes priced at less than $150,000
These statements were made as part of a pitch to sell congress on the idea of having government compete with subprime lenders by allowing FHA to offer 100% loans (currently they can only offer 97% although in reality it becomes 100% with downpayment assistance charities some of which are thinly disguised subprime lenders).
Here's GAO testimony on alternative mortgage products http://banking.senate.gov/_files/ACF84D8.pdf
From 2003 through 2005, AMP lending grew rapidly, with originations increasing threefold from less than 10 percent of residential mortgages to about 30 percent.
AMPs are interest-only or flexible payment mortgages, not necessarily with zero downpayment. As noted in the document these are mostly being used in the high priced markets in CA and in the vicinity of DC and NYC. So it looks to me like there are two dynamics here, first people with no money getting relatively small loans on cheap houses in crappy locations and second, people with more money (or who think they might have more money) getting large flexible loans in good locations. The former will be impacted by a general recession which may or may not be in the cards (I am betting not), and the latter has already seen significant drops (20% in my DC area market, probably similar in the others) and there is no blood in the streets. I believe prices are firming somewhat in those markets although another 10% drop would not surprise me.
And there is certainly a land office business in refinancing, now from ARMs to fixed where before it was the reverse - and including reverse mortgages not for first time buyers, but for refinancers cashing out some of the big equity boost the last 5 years have given them. For retirees especially, but also for speculators in CA who want to take cash flow from a winner 2-4 years ago and use it to carry another bet last year etc.
Some of those speculators will get killed, and some of those reverse financiers would have been better off selling and moving to a more affordable region (e.g. the CA to AZ trade). But none involve most of the country being paid on the equity side to support the interest side, out of non-existent equity, out of mere hope of price appreciation. Which is what the bears are alleging, and it is ridiculous.