>> The rate has a huge impact on the monthly payment required to service a loan
Which means people with 2% mortgage rates aren't going to be likely to sell their houses and buy another one at 7%. Which puts upward pressure on house prices due to fewer houses on the market. You have both demand and supply effects.
In the past in the US, nominal house prices haven't gone down during periods of rising interest rates. Maybe it will be different this time, maybe it won't.
Which means people with 2% mortgage rates aren't going to be likely to sell their houses and buy another one at 7%. Which puts upward pressure on house prices due to fewer houses on the market. You have both demand and supply effects.
In the past in the US, nominal house prices haven't gone down during periods of rising interest rates. Maybe it will be different this time, maybe it won't.