http://danskeresearch.danskebank.com/link/...reciousHome.pdf
If it is the case that new homeowners have been
important marginal buyers, then new homeowners
are probably an important factor in price developments
on the housing market. A shortfall of demand
for houses among prospective new entrants
(they’ll just stay away from the owners’ market) because
of excessively high mortgage costs relative
to disposable income, or, more drastically, the risk
of foreclosure among highly debt-exposed homeowners
who fail to meet their mortgage payments,
could both lead to downward pressure on prices in
the housing market.

Either disposable incomes have to rise, or mortgage
rates come down, or home prices come down.
Assuming unchanged disposable incomes and unchanged
mortgage rates, it would take a home price
depreciation of more than 40% to bring the mortgage
cost share of disposable income for new
homebuyers into line with the 1997-2006 average!
Add to that the risk that marginal high-LTVborrowers
probably constitute a fairly substantial
risk to prices, and the picture is not very rosy.