The number is quoted from being averaged over several years. I think the basic premise is correct though, one can live off that type of money passively and comfortably (depending on where you live of course). If you aren't seeing those kind of returns on average, move your money to a total stock market index fund.
The premise is incorrect because real rate of return is what determines how you can “live”. Even if you received 10% returns every year, it makes a huge difference if the medicine/food/labor you need increased by 5%, or 10%, or even 20%.
Additionally, if you have lost the ability to earn an income, then you cannot afford to be down a few years, hence you need to greatly expand the proportion of assets that are earning less than equities, and quite possibly putting you behind inflation. Especially if you live in a popular area.
Combine this with a nation whose population is aging and therefore competition for buying young people’s labor is going up, and you might want to be more conservative about expectations of the future.
As of right now, dividend-paying mortgage REITs pay around 9-10%. The US government will never let its housing market fail, and low interest rates let these trusts borrow inexpensively.
The US government came out and said that it would guarantee Freddie's/Fannie's debt which caused a sharp downtick as the government effectively admitted there was a possibility they could go to zero. Short (on the scale we're looking at) downturns, even if large in % terms, aren't a failure of a market. So, to answer your question, no.
While I agree that ever-increasing housing prices are almost the only platform both parties agree on, when there are already low interest rates and inflation occurring, the government is out of moves.
Never say never. Markets revert to the mean eventually.
Better plans is to plan on living off 4% of you nest egg if you don't want to run out when you are too old to start working again.