Actually, anybody can benefit from an illiquid housing market with low rents. Anyone that is smart enough not to buy and just wants to rent and invest their hard earned money elsewhere. In my affluent neighborhood I can rent a house for $2,000 a month that would cost $4,000 a month to pay a mortgage on, not counting maintenance, repairs, and upkeep. I could take that extra $2,000 a month and invest it in conservative financial instruments and make at least 6-7% return. Or I could be paying a $4,000 mortgage with only about $500 of that going towards equity and having to pay an additional $10,000 annually of maintenance and upkeep (generally considered to be 1.5% of total house price per year).

Which one would you do? The reason why _some_ people make money from housing is leverage. You take out a huge loan and if it goes up in value a few %, you made much more than your starting value. Leverage works exactly the same way when prices are declining. Your small $50,000 downpayment is quickly erased by a 5% decline in value.

I don't like leverage in my investments. I prefer to know that I can't lose more money than I invested in the first place. I diversify my risk so that I can never lose more than 10-25% of what I own with a single investment. Why would I put so much money in a single asset that is extremely illiquid and has so much leverage that I can lose more than my net worth?

Housing just doesn't make sense until the market returns to reality - and with federal subsidies including tax credits, Fannie Mae and Freddie Mac, it won't return to a fair market until _all_ government subsidies are removed, including mortgage interest tax credits, Fannie/Freddy backing mortgages, etc.