That period is when the absurd subprime and nonconforming python was still winding it's way through. There wasn't the rate and payment pressure that's really building and will continue to build now, so not quite the same pressure on sellers, free money and very low payments, very seductive. If you look at historical ARMs indexes, it wasn't until Feb, 2005 that they even got much over 3.0%. Then they kind of stalled at around 3.75% Libor (bad enough really on high price property)) from March to June, but now they are moving higher. Losing teaser rates is going to slaughter many casino rollers.
April 2004:
1 year CMT rate: 1.43%, 1 year Libor: 1.81%
July 13:
1 year CMT: 3.60%, 1 year Libor: 4.02% (add 2.75% on to CMT and 2.25% on Libor, for PRIME buyers).
Here it is again, four successive hurricanes that take down the whole economy, the biggest being first, subprime, with plenty of follow up killer punches.
idorfman.com
I worked with a NY Times reporter who determined that in 2007 alone, one trillion in IO will go to regular amortization. The article, the Trillion $ Bet. Did you see it, by Motoko Rich?
nytimes.com
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