In that case, the need for high levels of spending on housing will be reduced. And higher interest rates will be instrumental in bringing about the adjustment in housing expenditures required to keep economic activity from overshooting its potential. In principle, a housing or durables boom induced by monetary policy need not entail a bust that would be painful to the economy.
Of course, it is not likely to occur as smoothly as that. Among other things, markets could get it wrong for example, they could anticipate greater strength in underlying demand than is actually occurring. Then, higher interest rates would tend to damp spending unduly. But there is an “automatic stabilizer” aspect to the interaction of financial markets and the economy.