And a good counterpoint as well. Even if you buy the government forecast figures for inflations (which I personally don't, let's face it - they have an incentive to low-ball), you're not doing too badly. Basically the average price paid over the course of the loan on our example $300,000 house is ($300,000 [2007 dollars] + $205,993 [2037 dollars]) / 2 = $252,996.50 you're REALLY paying (in 2007 dollars) for the property. Of course the usual disclaimers apply (this is only a crude two-point interpolation, etc.) but the point is, it's still a very significant factor.
One thing I'm willing to assume is that there is significant short-term volatility in the market, that the re-fi market will continue to be fairly strong for the next few years and that housing prices will eventually go up over the long-term. Based on this, it's not such a bad thing perhaps.
I don't see much in the way of rising prices in the next 3-5 years, maybe a couple percent here or there. The market is flat overall or slightly declining right now. I expect it to stay that way, despite what the NAR puppets would have one believe.
It's interesting, I actually had (another) realtor sort of piss me off the other day by claiming that a property we were looking at would "have equity in it right away" since he had it appraised for something like $30k more than asking price. I just gave him that "are you effin' serious" look and pointed out that there are only two ways I know of to build equity - paying down principal and appreciation, based on what someone else is WILLING TO PAY, not what some bought & paid for appraiser says. He kind of shut up after that.
I guess the effect due to inflation could possibly be thought of as a third way, but didn't think of it at the time. . .