I think my first mortgage in the mid 1990s was around 7%. I remember double-digit rates in the late 70s/early 80s though I was too young to really care about it then. Home prices didn't inflate so crazily then either.
Rates are still low, historically. But as they are moving up from very low, the increases are huge, percentage-wise. Most of the reason home prices have inflated so much in the last decade or two is that borrowing has been very cheap.
For home prices to deflate people would have to sell at lower prices - in some cases below their home equity. In these cases sellers would have to basically pay the bank the difference. Given how affordable 3% rates are, I think people would not sell.
> In these cases sellers would have to basically pay the bank the difference
Or they can default. Mortgages in the US are typically limited recourse, not full recourse. Of course that makes you a pariah to lenders for the next several years...
Rates are still low, historically. But as they are moving up from very low, the increases are huge, percentage-wise. Most of the reason home prices have inflated so much in the last decade or two is that borrowing has been very cheap.
https://finance.yahoo.com/news/tracking-mortgage-rates-1970s...
If rates return to their historical averages, we may see home prices deflating or at least not increasing for a while.