Will high interest rates cause the housing bubble to burst?

When I first started my real estate career some 20 years ago the market was “hot” with multiple offers on most listings and buyers having to offer well over the seller’s asking price. A seasoned agent in the office commented, “If these interest rates ever go below 8% the market will really go nuts.” Compared to the 3% rates we saw less than a year ago, today’s rates don’t feel very good but they’re still reasonable. Rates in the 5-6% range are still achievable for strong buyers.
 
The bubble did burst with the mortgage meltdown of 2008 and inventory flooded the market as sellers had to sell, or, after owners were foreclosed upon their previous lender flooded the market with homes. Remember all those “bank owned” or REO listings? In Santa Clara County single family home active inventory was 7000 units and lenders couldn’t or didn’t want to do many loans back then, hence the dramatic drop in home values. It’s not like that today. Most homeowners have built considerable equity over the last few years so there will be few “forced sellers” which is what drove the inventory numbers up beginning in 2008. There are only around 1100 units on the market today and I don’t think it’s likely inventory will increase dramatically.