Higher rates mean that it's more costly to expand with debt, encouraging people and businesses to take on less debt, and thus at the margin, decreasing prices.
Mind you, higher rates don't appear to have done much for housing prices in a bunch of markets (e.g. the US, Ireland and Israel) so clearly the lags are longer than I was expecting, at least.
In Israel's case there's literally no space (it's the same size and population as the Bay Area)
Honestly, I can't speak confidently to the US here, but the Irish building rates were entirely unsustainable before 2008. Like, a fifth of national output was construction, which was definitely way too high.
The lag before construction started again (without the small builders getting bank financing) probably does explain some of the issue.
> but the Irish building rates were entirely unsustainable before 2008. Like, a fifth of national output was construction, which was definitely way too high.
Lotta corruption too on the Anglo Irish side by not doing due dilligence into connected developers like Bernard McNamara
Like, the whole nationalisation of Anglo is why I'm paying shed loads of taxes for crummy services, and you can trace basically half the problems of modern ireland back to that decision. Screw FF.
Note that I'm not sure this is a good way of managing an economy, but it appears to be what much of the Western world does right now.