This doesn't even touch on the fact that you will always require housing, so you can never truly liquidate your primary residence. At best, you can borrow against it. At worst, you sell it once and rejoin the rental market.
This is actually why as a homeowner, I'm not particularly bothered by the value of my house dropping.
Don't get me wrong, it's not exactly fun to watch its price tag drop, but the supposed dollar value of the house isn't "real" unless I'm looking to sell, which I'm not going to be doing unless I'm changing living arrangements, whether that be buying a different house or renting. Its value to me is that it's 1) a home and 2) a semi-fixed cost that won't ever be dramatically changing rather than increasing several percent each year.
One problem with the value dropping (assuming you're still paying off the mortgage): lenders can freak out and call the entire mortgage due and foreclose on your home. They did this extensively after the subprime mortgage issue.
Borrowing against it is a fantastic idea, what's wrong with that? People really need to learn that their assets can be used to generate additional returns. Otherwise you just have money sitting there, not doing anything. Where is the fun in that?
Nothing's wrong with it, but it's a bit orthogonal as viewing the property itself as an investment. Instead it's acting as guarantee against other investments.
I think one problem with this is that you paying banks twice (mortgage, home equity loans) for that money from your own property. And at almost 10% APR each.
It's really hard to reliably make over 10% on an investment.
