I guarantee that if interest rates were allowed to creep up, and the government stopped guaranteeing loans made by the banks, we'd have cheaper homes almost immediately.
Alternatively in the bay area there are a lot of wealthy people. I dont know how it would affect them
Low interest rates have the same effect in reverse. Prices adjust so that regardless of interest rate your monthly payment is about the same, but low rates do transfer huge wealth to existing homeowners.
As down payments have come down over time this is only more pronounced. From 50% down with a 5 year term in the early 1900s to peak-mortgage 5% down 50 year terms a few years ago.
I have often thought that the mortgage interest deduction is actually a subsidy to banks (because if you pay cash you get no deduction) and existing homeowners (because it supports existing prices).