I saw an interesting article on the captioned thread (in fact the same title) from Yahoo! Finance today.  Check it out.
What is the groupthink (or doublethink) on this?
Some quotable quotes from the article:
"This is a wonderful strategy,"
"You can take the difference and live nicely in another part of the country,"
"By relocating into a lower-cost market, they are able to reduce the carrying cost of that debt, such as the interest expense on the mortgage."
"You will feel a sense of success after paying off a debt and will want to do it again."
"A lower mortgage means higher taxable income, so adjust your withholding or estimated payments to make up the difference and avoid underpayment penalties,"
...and the piece de resistance:

"Homeownership will always be the American dream, but being a <u>slave</u> to a mortgage can be a nightmare. If you are struggling with high mortgage payments or have the desire for a lifestyle change, do the math and determine the equity you have in your home. The calculation may spur a quest to find a new place to call home."

Some friends of ours are 20-somethings who were priced out of the market. They were living with the in-laws in a house in Costa Mesa. The in-laws sold the house in June of 2005 for $675,000. They went to south Florida and paid cash for two homes, one for each family. Seemed to work out well for them.

south florida!  beautiful!  can’t say i don’t envy that.  plus must keep the drama down to have two separate households

Yep, some teacher friends of mine lived in the Aliso Area and bought during the mid 90’s.  Right around the start of 2005ish they sold and moved to New Mexico (home state).  Bought a new home, funded their retirements, their children’s education and work part time now….  Bastards! 
Oh well, at least I’m happy for them.  Anyways good luck
-bix

I just sold my house this weekend. I’m going to rent for 1 year and then buy again. I think the market has about -10% more to go before we hit bottom. I don’t see the sky falling but a 20% correction is more likely.

My wife and I both work for a Big 4 Accounting Firm, with offices and transferable jobs in every major US (and international) city.  It would be very easy for us to pick a spot on the map and go.  As the cost of California has skyrocketed out of our range in the past 5 years, we have gone through the pro’s and con’s of leaving many, many times.  I travel a lot with my job, and get to see a lot of different places—- many times my wife will join me for a long weekend in these other cities, to assess and see if we could make a go of it there.  Most recently we have spent time in Chicago, Dallas, and Seattle. But I have to say….Each time we come home with the same answer:  The only problem with leaving California is that you have to leave California. 
Sure, there are a lot warts here as I am sure we all could spend hours documenting.  That said, there are a lot of things to love about it—- and things that you will never find anywhere else.  So for us, while all those places have certain merits (mainly the cost of housing), we just cannot reconcile what we get for what we would have to give up.  Sure, we could buy a big house in Dallas or Chicago, but geez—- your house better be big, because you are spending half of the year indoors because of the weather—- either too cold or too hot.  Personally, I would rather be out enjoying the world (and all that So Cal has to offer) with a little smaller house.
I’d be interested if anyone else goes through this similar love/hate relationship….Love the place, hate the cost of living….And what your decision has been?

CK - "The only problem with leaving California is that you have to leave California"
Agreed 100%.  As The Eagles once put in very nicely....

Ck,
I completely agree with you, for me there are quite a few jobs going on back east, but CA has a tremendous amount of offer. I just wish I could afford a place to live versus a place to rent. The cost differential though is plenty good for me now (in a rental) and soon the trade off between renting and buying will pay out pretty fast.
-bix

We have some very good friends who relocated to Albany, NY a couple of years ago, for a great job oppotunity at GE.  Sure, they have a 3,000 sq ft house that they paid $350K for——but check out www.weather.com to see what they are dealing with today.  And you know what—- every time we talk to them they ask the same thing: "What’s going on with the So Cal real esate prices—- are they coming down yet?  We want to come home."  
If you hate it here, then take the equity and run.  If you like this place, however—- just grin and bear the cost of living, because there is nowhere else like it.

agreed.  i took the equity and ran and am now renting

however i am also single with no kids so it’s easier for me to float around.  heck, i just need a bed, tv and playstation.  laundry would be nice