There is more to high house prices than constrained supply
Home prices vary inversely with interest rates. Here's how that works:1) person tells bank they'd like a mortgage to buy a house.2) banker asks for info on income, expenses, etc.3) banker estimates persons maximum monthly payment.4) banker figures out max loan amount based on #35) buyer is encouraged by everyone to spend the full amount from #4Everyone - the seller, their agent, your agent, the bank, and maybe some others - want you to spend every penny you can. Everyone benefits from higher prices except the buyer. Even if you're immune to it, there is enough pressure that the market as a whole tends toward the highest prices people can afford.Now lets see how interest rates play in this. At step 4 above, the amount you can borrow for a given monthly payment is mathematically increased by lower interest rates. For a given amount of debt your payment should be lower if rates are lower - that's true - but they'll make up for it by pushing a larger loan.Ultimately your payment is determined in step 3 and has nothing to do with interest rates or home prices. You will "pay" the same for your house (total payments) regardless of interest rates. The only thing the interest rate determines is who gets the money - the seller or the bank.In a services and consumption based economy this is the primary way interest rates drive things. Sure, businesses will do their part too, but they're a smaller part of it.