OFHEO prices went up from 1968 to 1975, 1975-1982, 1982-1999 and any other 7-year period I can find. So, it’s no surprise that as a whole US prices went up in 1990-1997 as rates went down.
I agree that rates do impact prices. However, higher inflation (which accompany higher rates) also impacts prices.
Here is a chart showing OFHEO home prices (1975=100) from the mid 1970’s until 2000 (when the current bubble started IMO).
It turns out that the rate of home price increases during the period 1975 through 1990 (a period of generally higher rates, green box) was higher than 1990-1997 (a period of lower rates, gold box).
Rate changes do change the slope of the increases and decreases inversely as you state. However, history seems to show that during prolonged periods of higher rates, home price increases are higher, than during prolonged periods of lower rates.
[img_assist|nid=2487|title=Prices and Rates|desc=|link=node|align=left|width=466|height=349]
Don;t get me wrong. I think that any increase in rates will dampen home prices further. But sustained higher inflation that accompanies those rates would likely result in price increases down the road. Long-term prices track inflation. Rate changes cause deviations from this track.
