An interesting new paper tries to figure out causality and proportionality in looking at the various causes of wildly increasing prices in California real estate:
The median price of an existing, single family detached home in the state jumped from $241,350 in 2001 to $524,020 in 2005. Meanwhile, home purchases using adjustable-rate mortgages (ARMs) for financing nearly quadrupled (from approximately 20% to 80%).
The conclusion? Controlling for causality, size of effect, etc., and considering population growth, momentum, and the like, adjustable-rate mortgages usage were far and away the biggest factor: