"When we bought our home 2 years ago we were allowed to use 75% of our income to qualify for a mortgage
“A $220,000 mortgage is only about 200 bucks more a month then what we were paying to rent our apartment”
You make valid points, but... it all comes back to the downpayment. Someone that needs to use 75% of their income is not going to have a 20% deposit in the bank. Certainly they have not been living on 25% of their income and banking the rest for a rainy day. And saying a mortgage is only about $200 a month more is stepping onto a slippery slope. $200 is a lot of money if you don't have it, and add to that taxes, insurance, the occasional new refidgerator.
"People were buying homes and then refinancing them when the got into debt."
Same story, people that are responsible enough to save for a down payment generally won't be getting into debt so far they have to refinance.
spc : "You forgot the main ingredient, 10 million cans of irresponsible, not so bright consumers."
Sadly, you are right. It's only recently that I've begun to realize how many people do not have the knowledge to read or understand. They believe what the salesman says and are sold a story. A couple of years ago my cousin took a job working for a second rate mortgage place. The stories she told made me quiver, and after a while she couldn't do it any more and left the job. But... that too comes back to the down payment.
And Devil, There may have only been three houses to choose from, but there were 47,000 mobile homes on private lots.