In the Bay Area, where supply radically outstripped demand during the Internet boom, housing prices soared. Unsurprisingly, they've now fallen back down somewhat. In Houston, when oil prices collapsed in the '80s, the energy business fell to pieces, and lots of folks lost their jobs. No jobs, no mortage payments, no housing market.

I bought my house in 1999. In the four years since then it's appreciated by almost 25% in value, if you believe my property taxes or the recent appraisal I got when I refinanced. When I bought my house, very few houses were for sale, and the ones on the market didn't last very long. These days, 60-90 days on the market is much more common, and many more houses are for sale. That implies the demand has eased, but yet the value is still higher. What gives? The only theory I've got is related to the extended buying power that comes from lower interest rates. If you buy the theory, then the price of a house will automatically adjust up and down to match the buying power of people in the market for that sort of house.

My recent refinancing cut my mortgage payments by nearly 20% from their former rate, which was itself cheaper than the rate when I first bought. The value is up 25% from when I bought. I see a correlation here. If mortage rates go back up by three points, I expect the value of my house will fall back to what I paid for it. And, if that does happen, I won't panic.

Now, let's assume I want to upgrade to a house that's exactly twice the cost. Assuming my theory is right, is it better to do the house upgrade now, when I've got "bubble equity" to convert into a downpayment, or is it better to wait for rates to rise and the cost of bigger houses to drop? Assuming everything scales linearly (almost certainly not true), then the value of a double-sized house would fall twice as much as the value of my current house. That would say it's better to wait and buy later.

Does this logic add up?