Home Building: Do the first and second floor exterior walls have to line up

From the pictures it looks like the cracks may only be in the stucco, and the underlying structural wall may be unaffected. It's hard to tell without actually inspecting the wall, but my guess is that these cracks are only skin deep. However, you will want to treat them to prevent them from spreading.

Here is a good article about Cracks in stucco.

Here are some excerpts from the article.

All buildings are subjected to a variety of stresses in various forms and this stress is often transferred to the plaster stucco membrane.

Stucco is not and never was intended to be a structural material.

Cement stucco is a relatively thin, brittle shell over a framed structure and can crack if the stresses are transferred and overcome the strength of the plaster membrane.

SHRINKAGE STRESS

All Portland cement shrinks as it cures. Controlling and minimizing that shrinkage is critical to minimizing cracks

Shrinkage cracking tends to have a map-like cracking pattern.

OUTSIDE SOURCES

Structural loads, lateral force racking, thermal changes, wind, lumber shrinkage and seismic events are all examples of outside sources of stress.

HOW HARMFUL IS A HAIRLINE CRACK?

a hairline crack does not automatically mean the stucco is faulty, failing or will not function for the service life of the building.

MAKING REPAIRS

Once the decision is made to make repairs, there are several options.

Option 1: Treat the joint with the same finish material.

Option 2: Paint the wall or ceiling after treating the crack with an acrylic paint or paint designed for stucco.

Option 3: An elastomeric paint coating.

Option 4: Recoat the wall from architectural break to architectural break with the same finish material.

Option 5: A new basecoat and mesh over the wall area.

You'd need to get an engineer to look at it first. The biggest problems I can think of are structural -- even if the house is pier and beam, you'd need to move piers out. If it's not, you would need to dig out a new foundation. Then you have to figure out if the overhang is actually appropriate as a roof over indoor space, that moving the wall won't interfere with your joist and roof structure, and make sure that you're not interfering with your attic ventilation among other things.

I wouldn't just call a contractor and have him start swinging a hammer, and I definitely wouldn't do this yourself. On top of that, this will definitely require a lot of permits and a stamped architectural design to be filed with your city or county.