Definitely. Lower interest rate means that future dividends are worth more so same stream of dividends results in higher prices. True for stocks, bonds & houses. Also one reason that wealth inequality can rise with lower interest rates even when income inequality stays the same.
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The question then is why isn’t there a bigger supply response? Assets with long streams of returns should all increase in number relative to shorter stream assets.
What I'm particularly curious about is whether there are connections besides the obvious one that lower interest rates increase house prices. Could increasing house prices drive interest rates down? Could there be a third force driving both house prices and interest rates?
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I worry that low interest rates on government bonds and rising house prices might be evidence of some more general "metabolic syndrome" in the economy.
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Yes, in the sense that people are afraid to raise interest rates for fear of a housing led recession. There's an old paper https://www.nber.org/papers/w13428
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The fed sets interest rates. With mortgages follow the 10 year treasuries and the fed determines the alternative short term rate and how many treasuries to hold. Interest rates are not a free market
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The current low interest rates are due to central bankers trying to prop up weak economies. Low interest rates tend to inflate both real estate and stock prices.
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