Well its going to be tough to get a housing recovery with 92 million out of work and half of the rest working 29 hours per week. Not a good outlook.
The first time I bought a house (right in the middle of all the "irrational exuberance") I was pre-approved for a loan where the payments would have exceeded my monthly income.
Let that sink in for a minute. It's no wonder that the nation got into some trouble.
Now, the last time I purchased a house (right in the middle of the banks' 'Oh CRAP, how are we going to pay for all this?!!' moment), Mrs WBill and I had near-perfect credit and were looking for something well within our budget. We were still pre-approved but we only were able to get the exact amount of money required and not a nickel more. The paperwork needed takes up several folders in my desk, as well. Lots and lots of hoops to jump through.
So .... fewer unqualified people buying houses is probably a good thing, especially in the long haul. However, to your point, the pool of qualified buyers is shrinking as well, which will weigh heavy on the market in the short AND long term. It's a vicious circle that can only reinforce itself.