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The housing world is frozen in a state of trapped homeowners who don\u2019t want to sell, and reduced affordability partly because of high borrowing costs. But there could be a spring thaw in September that might help melt the market<\/a>.<\/p>\n It\u2019s a magic number for mortgage rates. And given Federal Reserve Chair Jerome Powell\u2019s dovish tone on Friday<\/a>, lending costs are poised to drop, clearing the way for lower costs on a home loan. There\u2019s somewhat of a consensus that once mortgage rates dip to 6% or less, it\u2019ll be irresistible to those who have been biding their time. Earlier this year, self-made real estate millionaire and Shark Tank<\/em> star Barbara Corcoran said<\/a> 6% seems to be the \u201cmagic number,\u201d that\u2019ll bring sidelined buyers back in. Robert Reffkin, cofounder and chief executive of realty giant Compass<\/a>, in June said<\/a>: \u201cI think 6.5% I\u2019d feel good about \u2026 but the magic number is 5.9999.\u201d He continued: \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\u00a0<\/p>\n Then there\u2019s Meredith<\/a> Whitney, the \u201cOracle of Wall Street\u201d<\/a> and chief executive of her own research firm, who said<\/a> this month, if mortgage rates drop below 6%, we\u2019ll see a spike in home sales.<\/p>\n We aren\u2019t there yet, but we are inching closer and closer. The weekly average<\/a> for the 30-year fixed mortgage rate came in at 6.46% yesterday. In the release, Freddie Mac<\/a> said, \u201csofter incoming economic data suggest rates will gently slope downward through the end of the year. Earlier this month, rates plunged and are now lingering just under 6.5%, which has not been enough to motivate potential homebuyers. Rates likely will need to decline another percentage point to generate buyer demand.\u201d (Daily mortgage rates<\/a> are the same, at the moment.)<\/p>\n And it\u2019s true that it hasn\u2019t been enough to really move the needle because existing home sales are still pretty depressed, for one. In July, there was a small rebound; existing home sales<\/a> rose 1.3% from the prior month, but were still down compared to last year. \u201cDespite the modest gain, home sales are still sluggish,\u201d the National Association of Realtors\u2019 chief economist, Lawrence Yun, said. \u201cBut consumers are definitely seeing more choices, and affordability is improving due to lower interest rates.\u201d<\/p>\n Capital Economics\u2019 economist Thomas Ryan called<\/a> existing home sales \u201cunderwhelming\u201d in light of the substantial drop in mortgage rates last month, but it could just take more time for that to reflect in sales data\u2014so August could tell a different, more magical, story. Still, he reiterated his stance that there won\u2019t be \u201ca rapid revival\u201d in the housing market this year, regardless of lower borrowing costs. For Ryan, mortgage rates would have to fall below 5% to see a full recovery, he\u2019s previously said<\/a>.<\/p>\n On the other hand, new home sales<\/a>, which have generally outperformed existing home sales, rose 10.6% in July. Ryan chalked that up<\/a> to \u201cpent-up buyers taking advantage of the sharp drop in borrowing costs last month, after having been sidelined earlier this year by high mortgage rates.\u201d Still, homebuilders have been offering incentives, such as mortgage rate buydowns, so that could be part of it, too. It isn\u2019t completely clear why lower mortgage rates seemed to matter more in the new home segment versus the existing one.<\/p>\n Either way, it looks like the Federal Reserve is ready to start cutting interest rates<\/a>. While a single cut won\u2019t solve all<\/a>, partially because it\u2019s already priced in<\/a>, it would be a step in the right direction, where mortgage rates are concerned. Who knows, sometime next year, we might finally reach the magic number.\u00a0<\/p>\n<\/div>\n\nRecommended Newsletter: <\/strong>High-level insights for high-powered executives. Subscribe to the CEO Daily newsletter for free today. Subscribe now<\/a>.<\/div>\n