Does it require changes in rates? Interest rates determine absolute property prices, by way of per month payment prices, but it’s the latter that should have primacy, right? What people can afford to pay each month.

Right. Property values are highly correlated with incomes, because that determines what purchasers or renters can afford. Interest rates determine how much of a loan a purchaser can service. So, low rates allow purchasers to bid up the price of assets, which effectively transfers money from borrowers to current asset owners.

Since property prices are highly correlated with incomes, and income changes are correlated with inflation and productivity gains, the only lever that can be pulled to change real estate prices is the interest rate.

For property to become more affordable, the interest rate has to rise. Since that would cause property values to drop, many people who recently purchased property would find themselves owing more to a mortgage lender than their property is now worth, and it would likely remain that way for a decade. Many of those people were stretching to afford their purchase before, with 3% down programs and half their monthly income or more going to service a loan. We are already at a record high level of mortgages in forbearance.

So, the interest rate cannot be allowed to rise. The only people that would benefit are people with a decent income, no debt, and substantial savings, who do not yet own an asset class. Almost no-one, and mostly young people. But low interest rates push money to seek higher returns, which causes investment to become speculative instead of seeking lower-risk capital improvements. This reduces future productivity gains, which lowers growth long-term.

In other words, the future is Japanification. Society will gladly sacrifice its children and future for a few more years of fun bucks. A decade long recession is, I believe, inevitable, and will happen after the next asset crash.

Everything you’re talking about only relates to the list price. I don’t know the right name for it. The value of the property. What you’d see on the for sale sign. You’re right about different levers on that.

The problem is that that’s not the price that matters in this particular setting. What matters are the monthly payments. If you change rates, the list price will change but monthly payments won’t.

> If you change rates, the list price will change but monthly payments won’t.

Exactly

If the buyer can only afford $1,000 a month with a 30 yr mortgage - that sets the upper bound of the list price of the asset

If rates rise the monthly payment stays the same, but the buyer can only afford a lower priced house.

If rates go down those $1,000 can now pay for a higher list price

If everyone keeps saying this long enough, eventually they’ll be correct. How many economists is everyone aware of who are themselves millionaires?

You know, you're not wrong. Inflated asset prices can last a long time. Fundamentals win in the end, but the end can take longer than a person's career.

"The market can stay irrational longer than you can stay solvent".

"When the music plays, you have to dance."

I'm just suggesting not to speculate with borrowed money.