#2 might make sense for if you are in States, but it doesn't yet make sense in Canada. The real estate is going kaput and pretty rapidly, but the prices are nowhere near their low point .. they are more like only half way down.

Just to give you an idea why this matters. First, a decent house in Vancouver area would cost you from 800k and up. Something for 400k is going to be in the area that few people would like to live. Second, spending cash on a real-estate during recession periods is the biggest no-no. These are the money that are hard to get out, leave alone getting them out without substantial losses.