Anxiety about a potential recession and sluggish economic data is leading to expectations about lowered interest rates and cheaper home loan costs. But lower rates alone won’t resuscitate the housing market. Rates are sitting at 6.47%, high enough that people don’t want to list their homes for sale, and costly enough to keep would-be homebuyers on the sidelines.

“We are skeptical that the recent decline in mortgage rates will revive the housing market,” Capital Economics’ economist, Thomas Ryan, recently wrote. “Rates are still high compared to recent years, discouraging homeowners from moving, while most potential new buyers remain sidelined due to historically stretched affordability. We remain confident that the recovery in home sales will be muted.”

Throughout the pandemic, mortgage rates fluctuated around 3%. It fueled a housing boom. People could live anywhere they wanted because of remote work, and cheap money only made it that much easier. But when inflation ran hot, and the Federal Reserve raised interest rates, mortgage rates followed. People stopped buying and selling homes, and the housing world froze. Existing home sales fell to their lowest point in almost 30 years last year, and they are still depressed. But mortgage rates are falling on the back of cooler economic data and some fears of a recession; they fell to their lowest level in more than a year last week. Still, the latest decline in mortgage rates doesn’t seem to be enough to bring everyone back. 

And it isn’t simply mortgage rates. Home prices rose substantially throughout the pandemic, and their pace of inflation has only begun to slow. All-around affordability is shot because the cost of buying a home today is so much more than it was only four years ago. 

That isn’t to say a drop in mortgage rates isn’t welcome—it is. “Lower mortgage rates will breathe some life into the market,” Ryan wrote. Last year when mortgage rates fell, home purchase applications rose, he said. But it was short-lived because borrowing costs rose again and loan applications dipped. 

“We may get more of a response from buyers and sellers this time around given that rates have fallen to a lower level, and more time has elapsed,” he said. “Based on past form, however, it seems that borrowing costs would have to fall below 5% to see a full recovery in home buying.”

So Ryan’s magic mortgage rate number is lower than that of, let’s say, Compass’s cofounder and chief executive, who recently said it was anything below 6%. Not to mention, Capital Economics doesn’t see that happening anytime soon. By the end of the year, the research firm estimates that mortgage rates will be closer to 6.5%, and next year, it expects them to be around 6%. Either way, it seems we’re coming closer to the 6% mortgage rate reality the National Association of Realtors’ chief economist recently warned of. 

Still, Ryan called the drop in mortgage rates “a turning point for the housing market,” in that they probably won’t go back to a 7% handle and existing home sales should be slightly better. But mortgage rates aren’t going back to their pandemic-era lows, unless the entire economy falls hard. 

“Only a severe recession could prompt a return to the 3% mortgage rates of the pandemic-era housing frenzy, as the Federal Reserve would be forced to cut interest rates a lot more than what is currently priced into financial markets,” Ryan wrote. 

He continued: “Such a scenario, however, would not support a robust recovery in home sales, as it would involve a sharp deterioration in labor market conditions with significant job losses. In fact, depending on the severity of the recession, this would either result in an even shallower recovery or possibly a further fall in sales. Nevertheless, we judge that a soft landing is the most likely outcome for the economy.”