I'm sure you're right. Every slimy car salesmen (about half of the total and, yes, all men) at some point all utter the line: "And what sort of monthly payment are you looking for?" That is the underlying assumption behind a gazillion mortgage calculators as well.
A while back I calculated (and I think I posted it here somewhere) what the value of a house is at 4% interest vs at 7% interest. If you assume the same monthly budget, prices plummet. The question is, is it a long-term issue or a short-term issue? Another article in The Economist says that savings are very high by historical standards. One factor is the growing income inequality - people with a lot of money can afford to save and, in a fairly real and direct way, the debt of the less wealthy drives the savings of the more wealthy. Very high savings leads to a lot of deposits which drives interest rates down (The Economist estimate was 0.6% due just to the increased income inequality in America and the resulting deposits) which leads the less wealthy to borrow more, which allows the more wealthy to invest in products (mortgage-backed securities) that make money off the debt of the less wealthy, increasing the savings of the more wealthy and driving the cycle.
Now, it seems like we might get out of that cycle with inflation eating away at savings and shaving away at debt and labor shortages increasing wages, and that may indeed be what happens.
However, another big driver of the "savings glut" (Bernancke term from 2005) is that populations nationally and globally are aging. I believe it was something like 25% are over 50 today and 40% will be over 50 in 2100. You have people living longer and fertility dropping. That's a double whammy. People are living longer so they need to save more for retirement and retirees tend to spend down their savings slowly. So that increases savings already, but then you compound that with more of the population being older and, therefore having more savings relative to the number of people who are in the market for debt (i.e. home loans, car loans).
So the net effect could be that after a period of inflation (The Economist projects the inflation bubble going to 2024 assuming the Fed takes decisive action soon) we return to long-term low inflation and therefore low interest rates until we bottom out on the aging cycle of populations and then things return to "normal" whatever that will mean in 2150.