[ted_dunning]

Percentages don't work like that, either. Since buyers are mostly bound by available monthly budget, raising interest rates increases effective price, which lowers demand at a particular price point which drives total purchase price back down to get the monthly mortgage price closer to affordable.

Obviously, this feedback isn't entirely effective because buyers can simply opt out or delay a purchase but it does have substantial effect.

Thus, increasing interest does not have the full impact as predicted by assuming that purchase price is fixed.