Low interest rates, QE, stimulus, and rocketing stock prices facilitated the hot real estate market as much as proximate covid policies. You are correct to guess there is a substantial discussion that you're ignorant of.
Low interest rates don't increase inflation do they? And rocketing stock prices are definitely not a part of inflation.
QE and stimulus can certainly contribute, but "as much" is a pretty big overstatement. If anyone thinks inflation was a notable fraction of the price quadrupling, they're being ridiculous. Even a huge amount of inflation would only be 2-4% of the lumber price increase.
Technically low interest rates are a response to low inflation. The point is that the interest rate moderates saving (in the general sense of deferred consumption) and investment.
If there are plenty of investments then limited resources won't allow you to do all of them, otherwise we would have grown our economy all at once in a single year. The interest rate is compensation for deferring consumption. i.e. you are being compensated for the opportunity cost of not spending money on consumption. The interest rate goes up in response to the profitability of investments. If I can earn a 8% every year then I am willing to take a 5% loan. Inflation makes investments appear more profitable than they are so the interest rate has to be raised according to inflation.
Well, ignoring 2020 and 2021 inflation was really really low to begin with. It's been at 2% at most. When inflation is low, interest rates can't go much higher. The fact that interest rates have gone down all the way to 0% (especially in Europe and Japan) without causing any meaningful inflation tells us that the interest rate is still too high to attract borrowers.
If one really wants to know whether interest rates drive inflation one must precisely define the term "low interest rate" because it's all relative. It's relative to inflation, it's relative to investment profitability and relative to how many people are deferring consumption (aka saving). Just because 0% is a really low number doesn't mean it's low enough to cause inflation.
From what I have heard (i.e. I don't know if it's true), large businesses are being overfunded and small businesses underfunded with loans. It's entirely possible that some structural reason is preventing lending that is completely inelastic to the interest rate.
Actually low interest rates are one of the primary causes of monetary inflation due to how fractional reserve banking works.
The TLDR is this. I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum.
> I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum.
This is how it's taught in school. The more-accurate version is that "whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money" [1].
Interest rates make borrowing cheaper. That spurs demand for loans which lets banks create deposits. To have the capacity to make those loans, the banks need sufficient reserve margin to meet the reserve requirement. This is usually a non-issue. They also need enough risk-adjusted capital. This is usually the issue. But if a bank needs more of this, and interest rates are low, it can buy the reserves through borrowing or equity issuance. Lower interest rates make both cheaper.
QE and stimulus can certainly contribute, but "as much" is a pretty big overstatement. If anyone thinks inflation was a notable fraction of the price quadrupling, they're being ridiculous. Even a huge amount of inflation would only be 2-4% of the lumber price increase.