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Investors in CA have resorted to buying properties based upon appreciation, and not cash flow. Held long-term, they can still be great investments. The only problem is holding during the down times. I would not like to wear those shoes.

Agree with you on the 30 yr fixed vs. ARM, Moneyguy1. On a $165k mortage, the principal and interest is around $1000/month. An ARM is around $825/month and is a sure bet to go up in the next few years.

pwd72s, I used to be high on the stock market. My senior year in college was 1999. I told everyone I would be a full-time stock market investor. After all, with all the baby boomers investing and tech stocks earning 20-30% year, I could retire in 10-15 years or better. The times have certainly changed. The stock market is no dud, but it's not the high flyer it once was. Also, like real estate now, there are lemmings who continue to believe there is no bubble. If there indeed are investors who buy, hold for appreciation, and resell, it is NOT a good sign. Speculation is rarely a good sign.
Jürgen