manna143,
About your friend, where is he living now? Did he buy a new house? If not, then he has understood the futility of ownership. If he has, then he obviously paid for his new house at peak rates of 2008. I.e. net loss, even in your supposedly good case scenario.
The thing is, it takes a loooong time to recover from RE slumps. As a medium term investor, I would steer clear even at rock-bottom prices, because I wouldn't be able to recover my capital + interest for as much as upto a decade.
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