The last time mortgage rates flirted with even 5% was fall 2018, a brief period lasting two months, during which housing demand quickly contracted. We're now in the sixth straight month of >5% mortgage rates, and housing is struggling to find a bottom. Home sales, construction volumes, and now even home prices are falling.

Here are a couple reasons the market is moving lower:

1. In 2020-2021, rock bottom mortgage rates enabled housing to hit escape velocity, but today they're locking up homeowners who bought or refinanced then.

2. This cycle, adjustable rate mortgages aren’t helping buyers find relief. In the mid-1990s when 30-year fixed mortgage rates climbed over 9%, ARM usage jumped to 35% of all mortgages. In 1999-2000 as 30-year fixed mortgage rates shot above 8%, ARM usage soared once again to 34% of all mortgages. Today, the percentage of homeowners using ARMs is just 8.5%, even as housing affordability resides near its all-time low.

A supply tsunami is unlikely. If there aren't significant layoffs or a sharp decline in income, homeowners with fixed-rate mortgages for 2020-2021 will not be forced to sell. The same can be said for the lion's share of homeowners avoiding the potential buzzsaw of adjusting ARMs, which can also trigger forced sales.