I've also lost money on real estate. The first house I bought was in a new townhome development in the midwest. Maybe 95k or so. The trouble was that there was endless farmland around it, and a new developer could just buy another farm and put up more mushroom houses. When we had to sell because we were moving, we were competing with a new development right down the street, and had to cut our price about 10k to find a buyer who wanted our 3 year old place, and not the new one down the street. NYC real estate goes up because it is tied to the international market, and you can only build so much on an island.
We've looked into selling the place and retiring to a nice college town. When we met we were both penniless grad students in debt, living in a nice college town.
But we make very good money here in NY (between the two of us, maybe 7-800k, depending on bonuses and options). We only spend about 20-25 percent of our after-tax income, even with one small child. That's why we could take out one of those interest only adjustable mortgages, and then pay it off before the rates really rose. Maybe we could have done better investing elsewhere, but the bank didn't get much of our money.
In about 5-6 years, we could retire right here at our current spending and savings rates. We like the culture of NYC, we hate driving cars, and there is stuff worth spending money on, in our opinion. I don't buy into lots of consumer stuff - but I like jazz clubs, I like travel to unusual places, and to expensive places (like London or Italy). I don't really buy stuff, but I will buy experiences.
If it wasn't working out, I would consider moving from Manhattan to Queens to bank equity in the apt., but I think the 5-6 years is worth it. My wife is basically agreed, but worried about health insurance and isn't quite ready to pull the plug just yet. I'm a city and culture guy, not sure that Texas or NM would really be right for me. Shame though, I could retire to Albequerque, or Missoula, or Boise right now.
I've lurked on these boards for about a month before posting. It's all given me a lot to think about.