Every market is different. I live in suburban southern California and our market has stayed up because the market is largely a "cash" market dominated by rational "cash investors".
While I understand your mortgage rate argument, I think it only goes so far in our market. Lower mortgage rates translate into more people buying homes for themselves, but unless rental rates accelerate with rising home prices, investors will drop out of buying homes and become sellers. Meaning you might get some upward movement because homeowners are generally willing to pay more than investors, but not as much as might have happened in the past, since those buyers seem a far smaller share of the market than in decades past.
For all the negatives being written about house investors, they do act as a buffer to housing prices. When families enter the market, they tend to outbid investors turning investors into sellers rather than competing buyers. When homeowners exit the market and a shortage of homebuyers exist in the market due to high interest rates, investors step in with all cash offers keeping prices from dropping too far.
Today's investors are unlike past real estate "leverage" speculators because downpayments for investor-owned properties are often 50% or more. So, they won't walk away if prices drop.
From some of the calculations I have seen, home prices rose with inflation (around 23%), but incomes only rose on average 21% during Biden's term and financing costs for young families buying a home on credit doubled.
On paper housing prices should have crashed, but there simply are not that many young families in the housing market anymore and so they don't impact prices the way they used to. The same is true of real estate speculators.
So, I don't see the bubble you are warning about. Instead, housing prices are likely to be driven in many markets more by rental rates than interest rates. Interest rates are not unimportant to families, but I just don't see them driving housing prices where I live, and we are in the real estate market. There simply are too few young families with children that have the downpayment to create a sudden surge in housing prices. Instead, if the market does surge some, investors will unload some of their investments and wait until rents catch up with the market before buying back in.
We own around 7 properties and manage over 45 other properties on behalf of over 20 investors. As mentioned, we are in southern California and every market is different, but this is what we are seeing.
What has been surprising to us is that even as people are leaving the cities of California (the LA population is down 324k in last ten years, the housing shortage is so acute, housing prices have not dropped but risen by almost 80% or 8% per year and rental rates are up 65%. This seems to confirm that rental rates more than interest rates are driving housing prices.
The housing market has changed dramatically since the Great Recession ended. The role of the real estate investor has also become a much significant one in the price of housing. How things will play out from my perspective is less tied to housing prices than changes in housing regulations, zoning, and permitting in our market. In other words, like many "markets" the housing market is going to be increasingly impacted by government policies ranging from rent control to changed zoning, to mandate to create affordable housing, to changing requirements for "conforming loans" and even changes in family size and composition more than interest rates.
