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As Jason pointed out, being upside down on a mortgage isn't a big problem because you can walk away (but the foreclosure will stick on the record for something like 7 years), or simply wait it out (housing prices recovered). As mentioned, the losers were people taking out ARM loans thinking they were going to be HGTV real estate heros.
I'm a big fan of 5% down (or less) because it shifts the risk back towards the bank, and frees up the cash to be invested in something that earns a higher interest (index funds). Basically the bank ends up taking on the extra risk of your gamble, which historically is a low risk one, and the only cost is a slightly higher mortgage interest rate, which itself is tax deductible. Since home values tend to appreciate, the extra cost of PMI usually only exists for a couple years. Through rising home value, it quickly crosses the 20% equity threshold where banks drop PMI.
Besides all that, fixed rate debt is a hedge against inflation. Something pretty well guaranteed to occur (and is occuring).
There has to be a lot of things going wrong for such a strategy like that to end up being worse than any other strategy. I mean, even the 2008 bubble pop wouldn't derail such a strategy. Back then checking accounts were paying 6-7% interest.
All that said, in Xist case assuming he is living with Mom for little/no cost, the only way buying a house makes financial sense is if roommates pay a substantial portion of the mortgage.
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