My older brother made that bet too with a three-bedroom house in Morgan Hill. Seven years after the Great Recession, he can't retire because the mortgage is still underwater and he's still paying off the down payment borrowed from his wife's 401k plan. He might have to work until the day he dies. What a tragedy.
That sucks. But I would argue that he made two bad decisions. I think that most Silicon Valley property is worth considerably more than at the peak just before the recent recession. Hence, apart from timing his purchase badly, the decision to buy in Morgan Hill was spectacularly bad.
It's my guess that cities that are on the outer reaches of commuting distance to the heart of Silicon Valley experience greater swings in value than those closer in. From a purely financial perspective, he should have realized this and compromised with a smaller house closer in.
I have seen peaks and troughs before, in the UK, one year, my house went up in value by approximately twice my annual salary and then, the following year, down by about my annual salary. I ended up OK, but some of my colleagues bought houses at the peak and were stuck with an underwater mortgage ("negative equity" as it was known in the UK) for many years. Having seen this, I was perhaps more cautious. Perhaps too cautious: I could have bought a house in Silicon Valley earlier and be sitting on more equity now.