I've had many an argument with baby-boomers (who bought into the housing market at dirt cheap prices 30 years ago) regarding this same concept. I told them whe

I've had many an argument with baby-boomers (who bought into the housing market at dirt cheap prices 30 years ago) regarding this same concept. I told them when interest rates move up from 3.5%, home prices would decrease proportionately, netting to the same monthly cost. I WAS WRONG. I was using logic to describe the illogical. Most people don't view real estate as an investment: to most, it's a place you can call home that makes you feel warm and fuzzy. So what happened when interest rates went from 3.5% -> 4.5%? -Demand increased: as people on the sidelines got nervous that rates would keep going up, they bit the bullet. -Increased demand caused prices to increase. -The price increase led to further demand from nervous buyers sitting on the sidelines, not wanting to miss out on their chance to own a home. -Finally, in my area anyway, I'm seeing absolutely insane ask prices, but less people are buying. Eventually, stubborn sellers will have to lower their asks to make a deal, but that can take some time. At a certain point, this doesn't work anymore as people can only stretch themselves so thin, but at least from 2011 (the "bottom") -> 2014, this is my assessment of what happened.