Can you find me an example of the price of an 'average house' decreasing over a 20 year period?
Although house prices certainly fluctuate down as well as up, most people wait out price drops rather than selling (often trapped by negative equity) so during a period of depressed prices fewer houses are sold. Conversely, when prices are rising people tend to believe that they will keep rising and that increased risk means increased returns, hence more houses are sold.
These effects effectively ensure that average house prices always increase over the long term.
Obviously there are always exceptions. Houses at the extreme end of the market are more susceptible to market forces. (Co-incidentally that's why you should not extend your house to be the biggest in its neighborhood - you'd be better off moving to an average house in a neighborhood of larger houses)
Remember also, that $370K will be worth far less than it is today. I'd bet also that the $150K house would be worth $500K.

With all that in mind, you did make an interesting and compelling case for considering renting. One point that you really didn't hammer on is that a house is a big committment. It costs time and money to buy and sell a house which eats into short term gains and exacerbates short term losses. If you are in a career or have a persona that demands frequent moves then these costs will certainly mount - and riding out an equity trap by becoming a long-distance landlord is not always a good solution either.