An historical view of the rate on a 30-year, fixed-rate conventional mortgage. As you can see it is at a record low level. What happens to the price of housing if mortgage rates head back up? Higher rates would make housing more expensive on a relative basis (putting more downward pressure on housing prices). It is obvious that the government is going to do all it can to keep mortgage rates down to prop up the housing market. Without record low mortgage rates housing prices would likely be much lower. For now low mortgage rates are propping up housing prices and providing homeowners with an excellent opportunity to refinance. However, there will be a large negative effect on home prices if/when mortgage rates begin to increase.
Data source:
> U.S. Federal Reserve. H.15 Selected Interest Rates. Primary Mortgage Market Survey - Feddie Mac.