Absolutely JB. However, I think it's more about the lower rates than the bigger loan/house. Those who have said no must think they know something that all these economists do not. The nature of these rates is fiscal policy, ie a way to control the money supply which is how macro-economic decisions are made.
We used to literally put more gold into the market to do the same thing. 100 years ago, the big debate was if we should add silver and go to a "bi-metallic standard". This is all about money supply which can speed up or slow down an economy. Now we have NOTHING backing the money!!! Neat eh? Well, almost nothing, trust backs it. All this paper that we all chase 5 days a week (or 7 if you're a real estate agent) has no real value eh, it's just dirty paper, but because we all TRUST it, it does indeed have value and we don't need any gold now.
Back to the issue, we DO need to control the economy (1929 proved this-the invisible hand theory is dead). And real estate drives the economy to a big degree. So by lowering interest rates, there is more investment in this cornerstone of our market, which picks up the economy in a huge domino effect. So one way or another, buyers get more money and thus buy more houses. This is basic macro-economics. It does NOT mean your house will sell right away, as real estate is a slow economic process. It does mean the macro-economy (things like inflation, unemployment, etc.) will begin to change.
To avoid getting too more complicated about it, the simple answer is "YES". But again, I don't think the fact that they can suddenly afford more house is what's happening or influencing. It's more about stimulating an economy of which they are a part... it trickles down. As an investor, I'm known to say every day right now "now is a great time to buy", why? Not because you can buy more real estate for the same down payment, no because financing is CHEAPER (my loan will have less interest expense AND my debt service is lower).
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