[pashamur]

Yeah, you pretty much nailed it - this article gives context, but it's pretty much as you said, most people are not adjusting by inflation & interest rate: https://realestatedecoded.com/the-shocking-truth-about-house...

Think of houses like bonds that pay a coupon (rent). If risk free rate goes down, the coupon is worth more in comparison so house price goes up.

The only downside is that when you buy a house that is cheap with a high interest rate you can benefit from refinancing if the rate goes down (and deduct your mortgage interest, which used to be significant tax savings). When you buy an expensive house at a low rate, you get no such benefit (although if inflation does pick up, the fact that you are implicitly short the borrowed dollars might still work in your favor).

[epistasis]

I think this is the correct analysis in many ways, but I am very fond of the Minsky view that we are all agents dealing with cash-flow.

The other side of cash flow is income, and I'd be very interested to see if income has kept under this analysis too...