I get what you are saying with biding war because of free money due to low interest rates. I am not going to deny that it’s a factor. The thing is there is a mismatch of supply and demand. Where the demand far out of strips supply prices go up regardless of other factors. This can be seen in markets where consumer financing doesn’t play a role in prices. We still see a rise in prices due to the bidding war. Fundamental high interest rates can’t increase supply and can only do so much for demand to the inelastic nature of housing. If housing was much more elastic then yeah interesting rates would be a bigger factor. But we all need to live somewhere so it can only become so elastic.

We don’t have an incorrect interest rate (regardless of what it is) we have a market failure. Market failures are not solved by adjusting the economic levers, they are solved by regulation. Higher interest rates will not stop private equity from using housing as an investment. They will not incentivize empty nesters to down size. It will make construction loans more expensive though, which I would suspect will further incentivize home builders to build higher dollar houses. As returns on starter spec homes are thin already.

So I stand by my assertion that this may not be causation and just correlation. I would suspect we get much more movement on home affordable if we were to let the interest rates sit where it is best for the economy. Then address the regulatory environment instead. Which you did allude to with zoning regulations as one area to address.