What person in his right mind would extend a loan of several hundred thousand dollars to an individual who will be unable to service the loan when the general price level rises by $150?

What you are describing is a situation in which a homeowner gets a parking ticket and has to default on his mortgage because he cannot afford to pay both. If this homeowner has a child then they will have to default. If this homeowner faces unexpected car repairs then they will have to default. If this homeowner has to make a hospital visit then they will have to default.

If this is the true nature of American enterprise then the whole world is laughing at you. And you want to be responsible for the world reserve currency, direct the IMF and World Bank, and dictate to Afghani yak herders how they should live?

Real estate already peaked by 2006/2007. Once that happened, people couldn't sell or refinance their homes to avoid the payment resets. It takes a few months after that to get behind on payments, go into foreclosure, etc. High gas prices didn't help the long distance commuters with McMansions 50 miles from work. It might even be enough to push a fixed-rate borrower over the edge, but nobody with a big payment reset was going to make those payments.

Whats your missing and what Gail should probably emphasize with the oil/housing bubble connection is new home buyers. Remember its a ponzi scheme you have to keep sucking in fresh blood. Continued home buying in the US using 3% down mortgages for 400k homes still way beyond reasonable prices indicates they did not run out of suckers however rising oil prices reduced the amount these suckers could pay for a new house.
So the bottom level ponzi entrants could not put as much down. 100 dollars a month finances about 15K so if your overall expenses go up 200 a month then you can finance 30k less a month.

Also of course interest rates where also increasing and this is something else thats being ignored.

The combination of rising interest rates and rising oil prices and general feeling of being squeezed and actually paying attention to your finances probably adds up to a 30-100k pull back in what you feel like you can finance. Also of course Americans where deferring the expenses via credit cards but you get the bill every month with the rising balance.

Its a confidence scheme and rising oil prices played a significant part in popping the scheme especially at the marginal end. Understand near the end they where selling 500k homes to dishwashers and strawberry pickers these people are impacted by this sort of increase.

I take the approach that money and oil are so intertwined that trying to determine the chicken and egg is fruitless. The truth is that our monetary system evolved in a period of cheap abundant energy and in general excess resources as this became increasingly false from both population increases and real constraints the overall system hit its breaking point. There or so many intertwined feedback loops many running over decades that you can't split it out.