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If you lived through the 1980s, today\u2019s 7% mortgage rates<\/a> probably don\u2019t sting as much as they do for those who weren\u2019t around, or weren\u2019t buying a home; and they hurt even more if you recall the historic lows throughout the pandemic.\u00a0<\/p>\n In October last year, mortgage rates reached a more than two-decade high; they\u2019ve come down since, but are still a far cry from the rates of a few years ago. The sudden shock has thrown the housing world off balance, but according to a top real estate chief executive, there\u2019s a magic number that could get it closer to an equilibrium.\u00a0<\/p>\n \u201cI think 6.5% I\u2019d feel good about \u2026 but the magic number is 5.9999,\u201d the cofounder and chief executive of realty giant Compass<\/a>, Robert Reffkin, said in an interview<\/a> with CNBC on Friday. \u201cThat\u2019d be marketing magic, and would tell the world that mortgage rates are at a level where they should go and grab a property.\u201d<\/p>\n For the 30-year fixed mortgage, daily rates<\/a> are at 7.02%, and weekly rates<\/a> are at 6.87%; so still higher than what Reffkin believes might trigger some improvement in the market. As long as we\u2019re around 7%, \u201cwe are going to continue to be at a low 4 million seasonally adjusted annual rate of home sales,\u201d he said.\u00a0<\/p>\n Existing home sales data<\/a> released earlier that day showed sales dipping 0.7% in May from the prior month, and 2.8% from a year earlier, to a seasonally adjusted annual rate of 4.11 million. Last year, existing home sales<\/a> fell to their lowest level in almost three decades, of about 3.8 million. A lot of that decline is the result of mortgage rates shooting up so quickly from historically low levels, that homeowners don\u2019t want to sell their home and give up their low rates. Consider this: A recent Realtor.com analysis<\/a> of data from the Federal Housing Finance Agency found that more than half of outstanding mortgages have a rate of 4% or lower. On the other hand, high home prices and high mortgage rates are somewhat dampening demand, meaning that not a lot of people are selling or buying homes.\u00a0<\/p>\n And the phenomenon described above, known as the lock-in effect, isn\u2019t the only reason why there\u2019s trouble in the housing market; there\u2019s a broader issue of supply that\u2019s pushing home prices higher and higher.\u00a0<\/p>\n \u201cPrices last month were the highest in recorded history, and the reason they\u2019re the highest is because there\u2019s not enough supply,\u201d Reffkin said. We need policies that encourage more development, assumable mortgages<\/a> so people won\u2019t feel like they\u2019re losing a financial asset or low mortgage rate when they sell, and interest rate cuts to bring mortgage rates down, to increase supply, he argued.\u00a0\u00a0<\/p>\n Either way, Reffkin said, we\u2019re in a \u201csomewhat of a confusing market because there are mixed signals.\u201d Last month, he noted, home prices hit their highest price ever recorded, according to data from the National Association of Realtors, and more homes on the market had price cuts than any other time over the past decade. It\u2019s not clear what data Reffkin was citing for his last point, but according to<\/a> Zillow<\/a>, 23.9% of listings in May had a price cut\u2014and Redfin reported<\/a> price cuts are more common, too.\u00a0<\/p>\n Reffkin expects home prices to be \u201crelatively flat on a month-over-month basis,\u201d which is in line with what we\u2019ve seen this year. The real change, or increase, happens when compared with a year earlier, and so far existing homes are selling for close to 6% more than they were last year.<\/p>\n<\/div>\n\nSubscribe to the Fortune Next to Lead newsletter to get weekly strategies on how to make it to the corner office. Sign up for free<\/a> before it launches on June 24, 2024.<\/div>\n