It's just one of several possibilities. And you're right, low inventory usually keeps prices high. However, housing inventory in Salt Lake County in particular is growing rapidly. I started actively looking to buy a house in 2022 after I moved back to the area, and back then, there were about 500 active listings in Salt Lake County - currently there are more than 2,500 active listings. So the trend has been good since then, and is almost back to 2017 levels, seasonally adjusted. But I don't think prices will necessarily be the sole factor to bring sales back to normal levels, but I think prices are more likely than rates. But IMO, prices, rates, or income, or a combination of all 3 will have to happen to return affordability to more historical norms, and return normal sales volumes of homes. Sales volumes are at a shockingly low number, nobody can afford the current combination of prices and rates. These are levels not seen since the 90's, even lower sales volumes than at the depths of the GFC:



It'll have to be rates, prices, or incomes that fix this and return affordability. That returned affordability may not be in nominal terms, it could be in real terms. But IMO, the headwinds for rates are larger than prices. The flood of upcoming treasury issuance, investor inflation expectations, and even if short term rates keep dropping, people forget that the Fed still has well over $2 trillion (Trillion, with a T) of MBS still on their balance sheet, and those MBS are not rolling off with simple pass through payments. With the Fed having stated they will reduce those holdings to $0, and with Lorie Logan recently talking about the possibility of outright sales of those MBS, that is a ton of MBS for the markets to absorb. It could keep mortgage rates high for a long, long time. But ultimately, something will have to give to break these ultra slumped sales numbers of homes, it'll be a big drag on the economy if churn stays this low for a long period of time.

There are also still the weird market distortions such as existing homes being priced at the same level (or even more expensive) than new construction homes (with rate incentives factored in) when existing homes usually sell at a 10%-30% discount compared to new builds, as well as a huge delta in many areas between the cost to buy and cost to rent, with the cost to buy being far more than rent for an equivalent place in those areas.

The Fed hugely distorted the market for first time buyers with their massive QE and particularly, their huge interference with rate repression by buying insane amounts of MBS. Before 2008 they owned 0 MBS. Close to "free money" 30 year mortgages generates insane demand, it is no surprise there isn't enough supply. But it is recovering really nicely, both in for-sale inventory and new construction inventory.