Even a drop in the mortgage rate of 1% could be sufficient to “unlock” the frozen housing market, known as Oxford Economics

But all hope is not lost in the American housing market, at least according to an economist. Bob Schwartz, Oxford Economics principal economist, said Fortune Although there is “no quantifiable rate” which would trigger more house sales, a drop of 1% of mortgage rates to less than 6% should be “sufficient incentive” for at least certain current owners to sell their homes and “exchange”.

One of the main factors that maintain the frozen American housing market are mortgage rates. During the pandemic, buyers locked themselves up at a mortgage rate of less than 3%. But now that mortgage rates oscillate between 6% and 7%, current owners are little encouraged to sell their current houses and to “exchange”, as Schwartz says, or a reduction in staff. New buyers are also resistant to higher mortgage rates than they have witnessed in recent memory.

In fact, the percentage of mortgages in progress with a rate greater than 6% has more than doubled since 2021, according to Schwartz, but this figure is still less than 20%. More than 50% of the mortgages in progress have rates between 3% and 4%.

While Schwartz said Fortune Mortgage rates should “lower considerably” compared to the current 6.63% to move the masses of owners of the key and put their homes for sale, a smaller drop could encourage enough people to do so.

“The housing market would be the largest beneficiary of the lower rates because they would unlock sales frozen by owners who hesitate to abandon mortgages at low rate of flow during the decade after the great recession,” wrote Schwartz in a note of August 8.

Other recent reports have also illustrated how much there is little faith in mortgage rates that drop in the pandemic era levels and how other factors in the housing market play in the affordability of housing affordability in the United States, a recent Zillow report has shown that a mortgage rate of 0% in certain American cities would not be enough to make the housing affordable because the prices of houses are still too high; They have increased by more than 50% since the start of the pandemic.

The high prices of houses “are the biggest obstacle”, Michelle Griffith, a luxury real estate broker with Douglas Elliman, based in New York, said previously Fortune.

“The inventory is tight and the competition is high, so the cost of the property itself is what maintains most of the buyers on the sidelines,” said Griffin.

Refinancing and future mortgage predictions

Although a drop in mortgage rates can encourage sales, Schwartz said Fortune Another probable scenario would be the current refinancing of owners at a lower rate. Although this cannot defrost the frozen housing market as much as the Americans could hope, it could be good for the economy in other ways.

“A significant increase in refed could have a significant impact on expenses, in particular if a good part is the variety of liquidity,” said Schwartz. “The owners are seated on $ 34.5 billions in equity, which could be used for spending purposes.”

Admittedly, mortgage rates should “fall rather radically” for this to happen, which the Oxford economist does not see in their perspectives at this stage, he added.

Regarding mortgage rates, all eyes participated in the next meeting of the Federal Committee of the Open Market of the Federal Reserve (FOMC) in September which will determine interest rates. On Tuesday, the summary of the consumer price index said that inflation marked only 0.2% in July, which brought inflation to 2.7%, better than planned. However, it is ahead of the target target of the Fed.

Although the IPC report had little impact on the cash rate at 10 years, which is the reference index for mortgage rates, it should not prevent the Fed from reducing rates in September, Schwartz said.

“Although with inflation always sticky and well above the lens of 2% of the Fed … We always think that the Fed will wait until December to cut,” he added. “However, if the next report on jobs for August is a failure, similar to that of July, there is a good chance that the Fed will be reduced in September.”