Eventually. Today, of the many houses sold, there's going to be .25% more people who can't get the loan they want. They're going to move down market, and buy a slightly cheaper house. The more expensive houses might lower their price, or take it off market or whatever.
It's like a distributed system. There's a bunch of complicated moving parts that all react to each other. There aren't that many knobs and levers to pull on. The fed can't tell home sellers to lower their prices, they can just fiddle with interest rates.
It's a mental model to highlight a point. if there were infinite mortgage applicants, and the fed change was the only change in the whole universe, there would be a 1-1 correlation. Lots of other stuff is going on, which pushes back.
No, that's wrong too. I have no idea why you think there would be a relationship like that. The two things you're trying to relate aren't even on the same scale.
It's like a distributed system. There's a bunch of complicated moving parts that all react to each other. There aren't that many knobs and levers to pull on. The fed can't tell home sellers to lower their prices, they can just fiddle with interest rates.