Don’t obsess over interest rates

After doing an extensive quantitative study, Glaeser, Gottlieb, and Gyourko report (ungated here):

Interest rates do influence house prices, but they cannot provide anything close to a complete explanation of the great housing market gyrations between 1996 and 2010.  Over the long 1996-2006 boom, they cannot account for more than one-fifth of the rise in house prices.  Their biggest predictive influence is during the 2000-2005 period, when long rates fell by almost 200 basis points.  That can account for about 45 of the run-up in home values nationally during that half-decade span.