Sol makes a very good point. For the average family, home ownership in the middle and high appreciation areas have been a path to wealth. Yes, the compounded rate of appreciation may be 4 to 7 percent, but that's not the point. Most folks bought a house with 3 to 20 percent down, and if they lived in it until the mortgage was mostly paid down or paid off, they have a mostly or completely free and clear asset. They did not trade in and out of the house, they didn't lever it up, they refinanced when the rate or terms made sense, they didn't dump the house when the value went down, they just held on to it. They likely benefitted from the leverage over time.
But what about all those negative cash flows in the interim for the mortgage payments, taxes, insurance, maintenance and that new roof? These folks needed a place to live anyway, and the difference between the rent and the cost of owning is what the house really cost them to acquire over the years. The important point is that value and net worth are snapshots at points in time. How they got to free and clear ownership of the appreciated property no longer matters once they get there.
Until mutual funds, Charles Schwab and the 401k/IRA accounts came along, very few people participated in the stock and bond markets. That was not a path to wealth for most folks. Real estate was something anyone with the down payment and some knowledge of how to manage property could participate in. Many people got very good at this, and the tax laws subsidized rental ownership.
With regard to Poorman's comments, I agree, except for his point about inland California markets not fluctuating. Those Inland Empire suburbs took a much bigger percentage hit in 2009-2012 than did San Diego or coastal Orange County. For the long term hold, you were probably better off in the areas that did not take as big of a hit. But you could buy more of the cheaper properties, sell them when the market recovered, and sock that cash away for the next drop in the high value, high appreciation areas.