Effect of lower interest rates on market prices (trick question)

[German E.]

Nobody knows how long mortgage interest rates will stay high, but one can start preparing by thinking what is likely to happen if/when they become lower, say in a year or two.  Most people seem to take it for granted that home prices will tend to go down, since demand will increase due to the cheaper mortgages.  But this is not obvious to me at all - notice that many people are stuck at their homes with a low mortgage rate that prevents them from moving.  When rates go lower, many will immediately offer up their homes for sale to move elsewhere, thus increasing supply as well as demand.  Thoughts?

[David Song]

The housing price will increase significantly in 2024 in the Bay Area.

The inventory level in San Mateo county and even east Bay Area has dropped to historical low, even though the price has not increased significantly.

This dramatic reduction in inventory is a strong precursor signal of rapid price increase.

For example, in foster city, the active SFH inventory today is down to 1 from 20-30 range.

In Hayward, the active SFH inventory dropped to below 30 from 50-100 range.

There is a huge number of buyers waiting to get into the market. With a simple projection of future rate stability or possible reduction, they have started to jump in. This has happened already, as indicated by the dramatic inventory reduction in December 2023.

The increased supply will be limited in my opinion, especially in CA due to property tax considerations.

My crystal ball says 2024 will be a high price appropriation year.