If they were to just dump all their paper on the secondary market, which I don't believe is in the pipeline, rates would spike overnight. 

I can't speak for Dallas, but when the next crash happens, it will be a much slower in GA than in other parts of the country that are experiencing spikes in real estate costs.

Looking at Bakersfield specifically, we have not reached our peaks from the previous market spike as many of the other areas of CA have.

I've looked at the daily usage online and it shows certain days where anywhere from 900 to 1500 gallons are used in a day, then normal for a week or so, then bam, another big spike.

As well, the opposite is true, if the investment time cycle of a project is very short, the IRR could spike very high, especially when an investment period is under one year.Once the first dollar of equity is invested then the clock to calculate the IRR starts and ends upon the final repayment of the original equity investment, any preferred return (called "pref") and the backend profit splits allocated to the equity investor.

But it could spike, could you afford for your ARM to eventually increase to a much higher rate. 

We need a large unemployment spike for that to happen over time.

Now the price is spiking up and the ratio in good areas are catching up to some secondary and maybe even primary markets.

If there is a real estate correction, but your property is full and people are paying rent, then you can just ride out the rise in cap rates and wait for better times to sell or refinance.But if there is a recession, and 5% of the people on your property stop paying you because they have lost jobs, and renters start doubling up with friends and family rather than rent apartments because they are out of work, then you may not make your debt service.So you need to be extra careful right now that any property you buy can pass a stress test of a spike in vacancy or economic vacancy.

The next crash will likely happen in car lending and developing country stocks and not housing.The next time we see a sizeable price drop 1 of 3 things will likely occur:1) Prices will drop but they will be higher then they currently are.2) Price will drop and investors (big and small) will flood the market and buy up the excess inventory quickly stabilizing the market.3) Interest rates will spike caused by either an increase in inflation and/or defaults from over leveraged developed economies.