patrick.net

rates are just part of the equation. There's also supply and demand. Prices are down right now because there's a ton of foreclosures and not enough buyers because unemployment is high.
If the economy improves then rates could go up along with prices.

and a ton more coming methinks

http://www.calculatedriskblog.com/2010/04/report-bofa-to-increase-foreclosures.html

Most prospective buyers are ony focused on this particular part(rates) of the equation. Realtors and banks are cunning and cloak the rest of the "equation" with smooth talk and sleight of hand.

I think the answer is that it can do both. Most current buyers are "monthly-payment borrowers" who determine their housing budget based on what a maximum monthly payment will give them. For these people, interest rate increases will mean more of their monthly payment going to interest and therefore a smaller loan. This will have a negative impact on prices.

However, if the smart people decide that high inflation is imminent then people will rush in to buying any hard assets in order to lock in interest rates with withe expectation of paying it back with cheaper and cheaper money.

Personally I don't think the second will happen until we see a wage-price spiral so for now anyway, interest rates creeping up should push prices down.

i don't think that houses can go back up. what are the average incomes in most places? that would tell you what the house prices should be. the houses only reached the crazy prices they did cause of the bad loans. without those loans a lot of people who bought the houses and drove the frenzy wouldn't have been able to buy. as interest rates go up house prices iwll have to go down. here in DC area your average house is between 300,000-500,000 depending on where you are, but that gets you a small 3 bed 2.5 bath house. to buy that even at 3 % down FHA loan, you would need 9,000-15,000 plus another 12-15,000 for closing costs. so for just a small starter home (these are prics for TH in a lot of places too) you would need 20-30,000 just for a 3% down home. who has that except for people who have been saving for years or who bought their first house before the bubble. AND you need tobe making 100,000 or more in salary.