Cost of housing, then and now. Also loan modification and the underwater loan

Housing costs where I live are very high, and I think this example illustrates it pretty well:

The parents of a friend live a couple blocks from me and paid $18,000 for their house in the 60s. At the time it was twice her dad’s annual salary. In the late 70s my parents bought their house in an equivalent neighborhood in the same city for four times my dad’s annual salary. Two years ago I bought my house (which is a lot smaller than my parent’s house and somewhat smaller that my friend’s childhood home) for almost six times my annual salary. My friend’s dad, my dad and I are all in the same salary bracket for our times so it is a good comparison.

What would it be like to have a house that only cost twice my annual salary? Or even four times?! OMG I would think I was rich! The entire mortgage would probably be paid off in ten years! Wishful thinking....

In a related story, I recently called my bank to ask about loan modification. They are going to send me paperwork to fill out and return (along with my last tax return and proof of current income) to see if I qualify for government programs for loan modification. If I don't they will then see if I qualify for their in-house program. I already know I don't qualify for government programs based on what I have read about them (too far underwater, loan too big, income too high) but the bank is going to make me go that route anyway. I don't know if I'll be successful but I figure "nothing ventured, nothing gained".

Being underwater makes me unable to do a traditional refi, otherwise I would and take advantage of today's better rates. Even half a point off my current 6.25% would save me a bundle. It irks me to no end that I am otherwise a great risk for the bank and all I would do with the money I save would be to pay more towards the principal of my second mortgage so they'd be getting the money anyway. In order to do a refi I need 20% equity and in order to get 20% equity in my home based on its current (Zillow) value I would need $245,000. If I had that much money I would pay off my second and 20% of my first and I wouldn't need a refi or modification!!!!!