Peter Hong, a Los Angeles Times reporter, posted a very interesting article on how he cashed in on the sale of his two-bedroom condo in Pasadena in April 2005 and become renters again. He bought his condo nine years ago and sold it at three times the original price and kept the profit in a 4% interest rate savings.
This is a very good strategy and is done by a few of people who thought that the market is really overpriced and got out of the real estate investment. Assuming that he earned $300,000 profit and is tax-free, he can purchase the same condo using this profit and pay the house outright. The real estate market is declining fast and will eventually come down to a more reasonable price that would match the affordability for a median salary in the region. If that happens, these people who cashed out and are sitting on the sidelines waiting until it drops to 2002 level are at a very good advantage as they would be able to purchase back the same type of house with their profits.