[notfbi]

"Affordability" usually refers to cost of ownership, generally as a proportion to some sort of income metric, not the full value of the home.

If home prices don't fall in unison with increased rates sufficiently then of course monthly mortgage payments (or imputed rent) goes up and affordability metrics worsen.

I don't think this is making economists scratch their head so much, if so it's like how "experts don't know how the pyramids were made" -- we know many ways it could happen, we just can't prove which one. Even in the simplest model of valuation, it's not the current interest rate that determines the home prices, it's the full expected rate over the lifetime of the asset. Of course if interest rates are 5% today but expected to be 1% next year, the price will be based mostly on the 1%. The longer term bonds and hence longer term mortgage rates can capture a consensus expectation, but there can still be divergence of expectations by the marginal seller. My dental hygienist on selling her house "The government needs to cut rates back so that people can afford to buy my house" with unsaid portion as I heard it "at my arbitrary zero-interest-rate-phenomenon based expectation of value".