MediaArtist does his homework! He is very correct on housing market in Sacramento. In fact, I live in a little city just south called Elk Grove. You will drool over what a $350k house looks like. Being a first time home buyer, I was shocked when I had to insure my house for $450K. I told the insurance company that I only bought it for $235k. They said the materials cost to rebuild my house to spec if it burned to the ground was $450k! That shows its possible to buy a house for less than it costs to build the thing!
So many Bay Area investors know a rental model like this only works in places like Sacramento. When looking at properties, I would put an offer down only to be beaten out by some Oakland resident who was walking around with $250k in their checkings and offered cash.
I feel FHA "levels" the field for a guy like me (26 and haven't had as long of a time to save up to compete against older more established, dual income individuals). Doesn't mean the program isn't immune to lemmings of the kind MediaArtist detests.