There was an expectation that this year would be better, and in some ways it has been. But the housing market is still stuck, and “if mortgage rates stay above 6.5% this year—as we expect—then the chances of an imminent recovery are slim,” Capital Economics’ Thomas Ryan wrote earlier this week, referring specifically to mortgage applications. 

Last month mortgage rates dropped below 7%, which led to an increase in mortgage applications for home purchases, but “that gain was tiny in the context of the ongoing three-year slump in applications,” the economist went on to say.  

Applications are only 12% higher than the 28-year low reached in October last year, when mortgage rates hit a more than two-decade high. And because lower mortgage rates fueled this latest bout, and they’re trending higher again, it might not last much longer. The average 30-year fixed weekly mortgage rate is 6.95%; daily mortgage rates are higher, punching in at 7.03%. 

In yet another sign of weakening demand amid severe unaffordability, pending home sales fell 2.1% in May, an all-time low, and on an annual basis, every region across the country registered declines. Redfin recently said pending home sales were down 5% during the four weeks ending June 30, their biggest decline in months. Separately, but in a sign of lessening demand as well, Redfin’s homebuyer demand index, which measures requests for tours and other homebuying services from Redfin agents, is down 17% year over year. 

Then there’s existing home sales, which dipped 0.7% in May from a month earlier, and 2.8% from the prior year—or new home sales, which plummeted 11.3% the same month. Meanwhile, home prices continue to set all-time highs. For its part, Capital Economics sees existing home sales remaining “extremely weak over the next few months.” 

The key to spurring activity in the housing world, at least in the short term, is lower mortgage rates. As Capital Economics has made clear, it doesn’t see that happening unless rates fall below 6.5%. Robert Reffkin, cofounder and chief executive of realty giant Compass, recently said: “I think 6.5% I’d feel good about…but the magic number is 5.9999.” He continued: “That’d be marketing magic, and would tell the world that mortgage rates are at a level where they should go and grab a property.”

It could be the magic mortgage rate for would-be sellers too. Capital Economics puts the average rate on outstanding mortgages at close to 4%, which is why a lot of people don’t want to let theirs go for one that’s 7% or higher. But maybe they’d reconsider if it were closer to 6%; more so if it were below that. Still, inventory has increased; as of the week ending June 29, new listings were up 10.8% from a year ago, and active inventory, as in all for-sale homes, was up 38.1% from a year earlier, according to Realtor.com.

But here’s the thing: Some have suggested that once mortgage rates come down, sellers might rush to the market, and home prices will shoot up—not great for anyone who wants to buy a home to live in. Barbara Corcoran, self-made real estate millionaire and Shark Tank star, in March said: “If rates go down just another percentage point…prices are going to go through the roof,” and it wasn’t her first time saying as much. 

On the other hand, Redfin economics research lead Chen Zhao recently said that “a drop in mortgage rates would bring both buyers and sellers back to the market, which could either accelerate price growth or pull it back depending on who comes back with more force. If sellers come back faster, prices would likely cool, but if buyers come back faster, prices would likely ramp up.”

Either way, it all depends on the Federal Reserve cutting interest rates; the central bank has only penciled in one rate cut this year, so we’ll see how much of an effect that has on mortgage rates.