...or just sit idle in a portfolio until the market bounced back, which is what happens in large real estate investments.

That’s not true at all. I worked at one of the big pe firms that made lots of money from 2008. Their goal was to move things to profitability asap. Either get a loan to performing (via getting holder to repay or rent), sell the note, or foreclose and sell the property (sometimes to a sister company). Same goes for anyone holding a property. Empty properties are targets for squatting and quickly fall into disrepair. The last thing a savvy investor wants is a nonperforming property.

I think parent's comment was about large real estate investments. Which can often sit idly for years before being sold/reinvested for a profit.

...and a massive plunge in real estate values would probably cause a lot of existing property owners to be upside-down on their holdings, forcing many to sell and/or default on their mortgage/debt repayments, which is sort of how this got started in the first place