In 2004, housing markets posted record growth. Homeownership reached an all time high of 69 percent, with households of all ages, incomes, races and ethnicities joining the home buying boom. Single-family starts hit a record 1.6 million units, while new and existing home sales grew to nearly 8 million. Mortgage product innovations helped markets stay hot. Subprime loans gave millions with blemished credit records, who would previously have been denied a loan, the chance to buy a home. Meanwhile, interest-only and adjustable rate loans are helping blunt the impact of higher home prices. Indeed, adjustable rate mortgages accounted for more than a third of all mortgage loans last year and interest-only loans for nearly one-quarter. This year's State of the Nation's Housing report from the Joint Center for Housing Studies cautions that creative financing is adding to risk. Although interest-only and adjustable loans can initially save a typical home buyer hundreds of dollars in monthly payments, these loans also leave borrowers vulnerable to sharply higher payments when interest rates adjust or principal payments start to become due. Payment shocks for most owners are still several years out. Many will sell their homes or refinance before they face these shocks. However, short-term risks of price declines and rising defaults will likely remain low if the economy continues to expand. When the economy hits a soft spot, though, housing corrections may be more painful than they would otherwise have been. Looking ahead, the report finds reason to believe that residential investment will reach new heights again over the next ten years. Strong levels of immigration are bolstering household growth and productivity gains are driving increases in real incomes. The baby boom generation is reaching their mid 40s to early 60s with record income and wealth. This will lift the demand especially for second homes, homes marketed to seniors, and large remodeling projects. Meanwhile, the entrance of the children of the baby boomers into young adulthood will lift rental and starter home demand.