Mmmm...but a $1m home appreciated at 2% per year is going to go up at $20k a year. It would be hard to get those kinds of non-taxable gains on savings.
The math here is wrong on so many levels. Just reading the statement strikes a dissonant chord in my brain. If you want, I can go through a line-by-line breakdown of all the mathematical nuances ... but I think I will get to the heart of the issue.
You cannot go back in time to alter your decisions - stop regretting it.
Save up and intelligently invest your money - if prices drop over time, upgrade when you get the chance.
If prices don't drop, well nothing you can do about it - live your life to fullest within your conditions.
Your friends got lucky in their housing choices -- it happens. Luck happens all the time. The flip side is if our economy had gone in the tank with your friends overextended on the mortgage, the bank would have foreclosed on them and then issued a 1099 for the auction price difference. Imagine ruined credit and a huge tax bill to pay the IRS. Would you have taken that gamble just to get a few more rooms in your house?