Previously developed areas that where already established and stable still had value loss but it was a slower decline due to the fact that those homes where not as underwater as most of the newer developed areas and those did not have as much pressure to Short Sale or let their homes go to Foreclosure.
Good news is Sacramento and Placer County areas are on the rise and combined with low interest rates we may have some good news for our local economy coming back together!
I think you'd be much better off with the 2nd argument... My reasons are that if you are in a stable neighborhood, no what the market condition is, you'll be better off.
If they market is hot, they prices go up along with the rental rates. If the market is slow and you are in a stable area with great amenities, schools etc..? folks looking to buy or rent will be looking to get the best value in the best neighborhoods because an area that is say "not as stable" will show the wear and tear.
The more "pride of ownership" there is in a neighborhood, the higher the value.
I hope this helps...
Make it a great day....
Your best investment is whatever matches your strategy. Do you want to buy, hold and earn equity for later resale? Or do you want to buy in a great but more expensive area and have less trouble renting out the home? Do you strictly want cash flow regardless of area? Many questions to ponder!