But not all hope is lost on the U.S. housing market, at least according to one economist. Bob Schwartz, a senior economist with Oxford Economics, told Fortune while there’s “no quantifiable rate” that would trigger more home sales, just a 1% drop in mortgage rates to lower than 6% should be “enough of an incentive” for at least some current homeowners to sell their homes and “trade up.”

One of the prime factors keeping the U.S. housing market frozen is mortgage rates. During the pandemic, buyers locked in at a sub-3% mortgage rate. But now that mortgage rates are hovering between 6% and 7%, current homeowners have little incentive to sell their current homes and either “trade up,” as Schwartz puts it, or downsize. New buyers are also resistant to higher mortgage rates than they’ve witnessed in recent memory. 

In fact, the percentage of mortgages outstanding with a rate higher than 6% has more than doubled since 2021, according to Schwartz, but that figure is still less than 20%. More than 50% of outstanding mortgages have rates in the 3% to 4% range. 

While Schwartz told Fortune mortgage rates would have to “drop significantly” from the current 6.63% to move the masses of homeowners off the sidelines and put their homes up for sale, a smaller drop could encourage enough people to do so.

“The housing market would be the biggest beneficiary of lower rates as they would unlock frozen sales by homeowners who are reluctant to give up the low-rate mortgages taken out in the decade following the Great Recession,” Schwartz wrote in an Aug. 8 note. 

Other recent reports have also illustrated how little faith there is in mortgage rates dropping to pandemic-era levels and how other housing market factors play into housing affordability concerns in the U.S. A recent Zillow report showed a 0% mortgage rate in some U.S. cities wouldn’t be enough to make housing affordable because home prices still remain too high; they’re up more than 50% since the start of the pandemic.

High home prices “are the bigger hurdle,” Michelle Griffith, a luxury real-estate broker with Douglas Elliman, based in New York City, previously told Fortune.

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

Refinancing and future mortgage predictions

While a drop in mortgage rates could encourage outright sales, Schwartz told Fortune another likely scenario would be current homeowners refinancing to a lower rate. Although that may not thaw the frozen housing market as much as Americans may hope, it could be good for the economy in other ways. 

“A significant increase in refis could have a significant impact on spending, particularly if a good chunk is of the cash-out variety,” Schwartz said. “Homeowners are sitting on $34.5 trillion of housing equity, which could be tapped into for spending purposes.”

To be sure, mortgage rates would have to “fall pretty drastically” for that to happen, which Oxford Economist doesn’t see in their outlook at this point, he added. 

In relation to mortgage rates, all eyes have been on the Federal Reserve’s upcoming Federal Open Market Committee (FOMC) meeting in September that will determine interest rates. On Tuesday, the Consumer Price Index summary reported inflation notched up just 0.2% in July, bringing headline inflation to 2.7%, better than many expected. Still, it’s ahead of the Fed’s 2% target. 

While the CPI report had little impact on the 10-year Treasury rate, which is the benchmark for mortgage rates, it shouldn’t prevent the Fed from cutting rates in September, Schwartz said. 

“Although with inflation still sticky and well above the Fed’s 2 % target … we still believe the Fed will wait until December to cut,” he added. “However, if the upcoming jobs report for August is a dud, similar to the July one, odds are the Fed will cut in September.”