may/june to be worse ?

and thanks to the idiotic greedy short-sighted cheating merka hating korprit lenders aiding them in doing so, 1st time buyers in the 2008 era are now 'priced out' (25+% down and 30 year 6% rate WITH A GREAT!!! credit rating?)  in almost all locations even though houses are on the market 'cheap' (relative to 2 years ago, though still vastly over-priced) .

Well, IIRC conventional time-proven wisdom (and lending practices too) basically said don't go over 1/3 of your paycheck on your mortgage. Though that thinking was generally effective for 40 years or so, it was pre 2000 (healthcare)  and certainly pre-2006 (oil)  and pre-2008 (food). At this time, I would say the value should be dropped to 18-22% at most- and good luck making that happen when the median household income is 44k/year.

And MY point is that who really followed that?  Borrowers?  No -- they decided how much house they thought they could afford and went from there.  Lenders?  No -- they looked at each potential borrower's total income and total debt load, then decided how much house they were willing to lend money for.

There is no magical number that fits everyone.  Bill Gates can afford a house with a monthly payment of 75% of his monthly net; Guy In A Cardboard Box In The Alley can't afford *feces*; what Average Middle-Class Family Guy can "afford" depends on his specific debts, the limits on his credit cards, and, to a lesser extent, the lender he talks to.

touche (and agreed, EVERYONE IS DIFFERENT SITUATION), but i would argue that for the sake of the 'general' argument we should focus mostly* on the "Average Middle-Class Family Guy".  discussing the outliers on the far extremes either way doesn't tell us that much. 

so on that topic, for example... with a lot of ARM's jumping a few points, people (we'll leave the discussion of whether they were dumb to go into the ARM for another time) are now seeing $300+ spikes to their mortgage. which for "Average Middle-Class Family Guy" on the "median" income, that's 10%+ of his paycheck down the drain that he's not used to! 

We were lucky enough to put a large down payment on our house.  And our mortgage payment is 30% of my take home salary.  Of course we had two salary's when we bought the house and will soon have two again.  So that number was much lower then and will soon be lower.  We bought our house in 2005 during the height of the bubble, but luckily inner city okc hasn't been hit too hard.  The lender approved us for a house over twice what we ended up getting.  Had we gone with as much house as we could of then we would be totally screwed and unable to allow my wife to return to school.  We had good credit then and still do, but the amount available was completely ridiculous and irresponsible.  Thank god we still got a starter house instead of going all out. My McMansion may well be in foreclosure too.  I think the lenders should hold more than their current share of the blame.  

People should realize the only way their current home is an asset is if they move somewhere else and rent it out.  It doesn't bring them cash flow living in it.  It is all expenses.  Sure it can be a great vehicle for a long-term investment but in the short-term it is our biggest liability.  

You seem to be doing a lot of ARM-waving.

Many people do think that their income will be greater in five years' time, that they can/will refinance when the rate adjusts, or that they won't be in the house for more than five years.  When I got out of school, I KNEW I wouldn't be in our first house for five years.  If I switched jobs, I'd almost definitely move out of Portland.  If I loved it there and wanted to make that firm a permanent thing, I'd be making so much more money five years later than we'd upsize anyway (to make room for kids, more animals, and a chaps exhibition hall).

My BIL, on the other hand, was an idiot for taking his last house on a 5-year ARM.  He's in a job and field where raises/promotions aren't rapid or substantial, and they already had one kid with plans for more.  The rate adjustment time hit, they saw the size of the new payment, and they had to sell (quickly) and buy elsewhere.  Who couldn't see that one coming?

Does anyone here know anyone who was "victimized" by a rapacious mortgage broker?