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Ya, buying rental housing was a great buy in the late 1990's (particularly if you "knew" interest rates would decline. I should have bought more, but I wanted to diversify, since I owned so much already (thus I paid off mortgages, bought savings bonds and TIPS, etc). Now it is a more neutral proposition, with price levels about what they should be, at least in SoCal, for housing that makes sense as a rental. The mini mansion to mansion market is a different puppy entirely. It marches to its own drummer, and has little to do with cap rates etc.

BTW (Torie), I think it's great that you have prospered in the rental market. I definitely agree with your second point, but I think the same holds true (to a lesser extent) across the entire spectrum of the housing market.

I have one more chart for you, and then I'm off to the races. You will have to forgive the reverse in course as this idea is rather new to me. At any rate, this chart is potentially the most disturbing of all. It shows the change that occurred in the CPI once we switched to Owner's Equivalent Rent. If the implications are true, then it would suggest that housing (not to mention commodities!) may have kept pace with inflation after all. This, of course, has huge implications for the larger economy...if true. I'm currently trying to dig up more info. to determine if the CPI is indeed understated (and by how much). Needless to say, inflation may be much more pronounced than we have been led to believe.