That's like someone saying that we can't count on the stock market to go up, and thus it's not wise to invest for retirement. That's not rose-tinted glasses. That's reality. The stock market goes up. Housing goes up. In the long run, it always will, particularly in good markets where land is becoming more scarce.
My house was an example to illustrate the phenomenon, not an attempt to prove that it's happening (which doesn't require an argument -- it requires observation, since prices almost always go up, and they're going up now, pretty fast).
Credit isn't free like it was back then -- you actually have to qualify to get a mortgage now, so the conditions that led to the burst aren't there anymore. It's not wise to bet that a rare occurrence that was fueled by something specific is going to repeat itself when the conditions that fueled it are no longer present.
Yeah, we can't guarantee that prices are going to go up, but we can be reasonably certain that they will in the short term and almost certain they will in the long term (if you're buying a home, not an investment, then even buying in 2008 wasn't that bad), and bargains you can get now won't be bargains for too much longer.
One of my favorite things to look at is a relative's house that cost $200k just in the late 90s. It's worth well over half a million dollars now, a couple of recessions later, but his payments are minuscule. This being California, his taxes are almost nothing now, too. Short term panic over housing prices shouldn't scare people away even from investing.
More importantly, one shouldn't adopt the ridiculous idea that because prices might possibly stay temporarily flat or go down at some point, it's good to bet that they will. That's basically never a good bet.
The surest sign, by the way, that prices aren't going to tank in the near future is that all of my Republican friends seem absolutely convinced that they will.
More importantly, though, if you buy a house, you don't lose anything if the price goes down. So buying a house (even a rental property) isn't a bet that prices will go up. I used stocks as an example earlier, but those are kind of a bad example. A house saves you money even if prices are flat. They'd have to drop a lot to make waiting a good deal, because you still have to pay for a place to live while you're waiting on prices to go down (and again, most of the time they won't).
Say I buy a house for $400k. Then the price drops to $300k two years later. So what? If I had a way of predicting the future, I'd know I could have saved about $75k buying the house later ($100k savings minus two years of rent, assuming I'm renting a dump). I get two years of use out of the house, too, and I'm two years closer to being mortgage-free. In ten years, when the price is up to $650k, no one will care that it took a dip except for the soothsayers who knew exactly when it would happen and then had enough money to outbid the cash-only investment buyers.
Meanwhile, someone renting during that time just dropped $150k on rent money and now has to buy a house that costs $650k, and that person will be ten years older before being mortgage-free. Oh, plus ten years of living in a cramped apartment instead of enjoying a nice property is worse for quality-of-life -- life is very limited, so that could easily represent more than 25% of your prime years! (Yeah, I didn't adjust anything for inflation there, but that's another thing that benefits homeowners -- your inflation-adjusted monthly payment actually goes down until it finally disappears!)
Again, the only reason a house might not be a good deal to someone who is not going to move around much is that the down payment is an opportunity cost, assuming you have amazing investment skills.
I didn't even mention what will probably happen to interest rates in at some point.
But again, one last time, buying a house is not betting that the price will go up. It's just a way to protect yourself when they do go up, and you protect yourself buy putting equity into your home instead of putting it into your landlord's pocket and walking away with nothing.
If you happen to buy before prices drop, who cares? You still locked in a housing budget for the rest of your life, and if you didn't do something dumb, it's a budget you can afford. It's a budget that will almost certainly take you well under the rental market prices just within the timesframe of the mortgage and then will wildly outperform it after that.
Once my house is paid off, I will never have to pay for housing again. That's a good feeling.