Reality is probably somewhere in between you guys.
Obviously the cheapest homes in poor areas aren't $400k. That's the median for the entire country, so there are lots of homes much cheaper, and a friend making $80k and having to live in a van suggests truly horrific spending choices.
The problem is that what living frugally entails and the payoff for doing it is unreasonable imo. It would be one thing if living frugally meant stop buying luxury cars and taking expensive vacations and eating in restaurants every night, or stop wasting money on expensive entertainment, but if you have to not have a family, fast for days at a time, live in a crappy studio in a high scrime neighborhood and wear a coat at home so you don't freeze, and maybe you can buy a crappy place in the same high crime neighborhood a few years later, that's more than just being frugal.
The economy is pretty unstable if the house price to income ratio isn't even close to the recommended amount. Recommended amount is a house valued at 2.6x your income, and we're now almost at 6 for median house to median, so "affordability" now means median income matches you with a shit tier house for the next 30 years.
Not to mention that even if you got in when it was more reasonable just a few years ago and already bought a house, your property taxes keep climbing for something you allegedly alredy own.