It's used when being told something that's tragic or scary that has happened to a loved one, relative, any person (sometimes).
- Isaiah said...
Hey Tad I blew up one of your tires while parking it.
- Tad replies...
MAY YOUR HOUSE BURN DOWN ( in a friendly sportsmanship, MANNER) so YES it can be used in a offensive or jokingly way in other people's PRESPECTIVES.