If interest rates go up, homeowners are instantly underwater on their mortgages. Purchase cost on housing is very, very tightly correlated with the interest ra

If interest rates go up, homeowners are instantly underwater on their mortgages. Purchase cost on housing is very, very tightly correlated with the interest rates, because shoppers' budgets are determined by their monthly payments, not by the total cost of the house. When interest rates go up, potential buyers can't afford to borrow as much money, and prices have to fall.