30-year mortgage rates are near 8% with excellent credit. Interest rates have climbed for the past three months straight. The Fed is considering another interest rate increase for November and December, possibly pushing rates up to 8.5% or even 9%. The reasoning is that higher interest rates will "slow down inflation".
Home sales are at a 13-year low. Factor in the higher cost of insurance and the fact that property taxes are going up to unaffordable levels and the very high cost of labor and materials for home construction... and you have a real estate market that's going to crater.
I personally know several homeowners that had their homes listed for sale, but have removed them from the market in the past 2 months. They will wait and hold on to what they have for now. One real estate agent mentioned to a couple that they should keep their house off the market until at least middle of next year and then decide based on market conditions.
I'm suggesting that the U.S. economy is a three legged stool... and one of those legs is housing and private & commercial real estate. If it fails, the economy goes into a deep recession at best.
"counts on people paying back their loans so that the money can be reloaned to others"
That isn't how that works. When a mortgage is taken the banker creates new money and it is paid back with interest. They do not loan out money on deposit. This is why inflation is a constant thing, because they are constantly inflating the money supply.
There used to be rules about how much they could create(loan) based on how much was on deposit but those rules were removed around 2008 I believe. Nope, in 2020.
"As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions."
https://www.federalreserve.gov/monetarypolicy/reservereq.htm