More often then not the homebuyer measures affordability by monthly payment as opposed to home price, (at least in Cali due to relatively low property tax). Pretty much every buyer now usnderstands that the our future is cast in stone with regards to higher interest rates. So I do not believe anyone will be in for a rude surprise with regards to rates rising.

The speculation about price depreciation is quite valid BUT I do not believe they will correlate to the rate hikes. How proportional will they be? I could not guess but once you hit investor return levels you will see the bottoms set for pricing. Again, I do not know what this is as it varies with each area. Similarly those who do not have 6 figure nest eggs to drop into homes will simply not be able to buy. They will not be able to afford the homes even with large price drops. I do believe the price drops will be there and will be nice to see. For those who have prepared correctly, they will get rewarded. For those who have an affordable payment locked in, they will be happy with the payment but unhappy with the depreciated asset and depending on the amount of depreciation they may not be able to sell without a loss.