>Lower interest rates shouldn't result in higher list prices.
For the vast, vast majority of homebuyers the only number that matters when purchasing is the monthly mortgage. If the totally monthly payments of a $550,000 house at 6% are the same as a $800,000 house at 3%, well, technically you can pretty much "afford" both houses. In the end, the total paid cost for the house after 30 years is more or less equivalent (assuming your rate is locked and you don't refinance ever).
For the vast, vast majority of homebuyers the only number that matters when purchasing is the monthly mortgage. If the totally monthly payments of a $550,000 house at 6% are the same as a $800,000 house at 3%, well, technically you can pretty much "afford" both houses. In the end, the total paid cost for the house after 30 years is more or less equivalent (assuming your rate is locked and you don't refinance ever).