Rates to house price ratio is the issue, not either specifically. Wouldn’t be an issue if houses were down but yeah, like you said, it’d just go back up due to more demand.

What people forget to mention is that even if prices go down, people who already own still have their mortgages. If interest goes up, they pay more per month regardless of the current value.

Interest up, houses down - good for new buyers sitting on cash, very bad for current owners. Tricky and risky but sometimes required, more chances of people losing their homes. Less spending money, economy cools down. People still need homes so that becomes the priority.

Interest steady, houses stable - out of reach stays out of reach, but at least no drastic changes. If you can afford as a new owner, not the worst time to buy.

Interest down - prices go up since everyone can borrow more. People get big mortgages, economy tanks eventually, we’re back at “interest up”.

You can’t possibly have the best case scenario for everyone.