The idea that housing prices won't come down regardless of interest rates is ludicrous. A $600k loan requires $50k/year in additional income compared to a year ago to qualify. It definitely prices out a lot of prospective buyers.
Well, theoretically if rentals continue to support sky high pricing that would support higher housing prices. Say you pull in 4000 from an upstairs and 2200 from a basement. That’s 74k minus taxes and maintenance. For a house going for 900k you get a cap rate approaching 6%. With a 10 year fixed at just above 5% that could work for investors and support pricing. But if prices are approaching 1.2 as they are in some spots, or rents soften, you end up with a 4-5 cap and that’s when you have negative leverage. That means the bank is making a higher return on its secured debt than the investor with the higher risk. That spells trouble for pricing going forward.