With the massive amounts of upcoming treasury issuance that is going to be needed to fund the growing and massive federal deficits, I think high yields are going to be needed to entice buyers for those huge quantities of treasuries. Since mortgages typically track the 10 year treasury, it's very possible they stay normalized for years to come, or even climb if increased treasury volumes demand higher rates to sell.

These mortgage and market rates are also finally back to normalized, healthy rates, at least historically. Rates aren't the problem for housing, prices are. These are prices that were born of artificially repressed rates, and really only work with artificially low rates. If prices adjust to a more historically normal price-to-income ratio for 7% rates, sales volumes will pick back up to more normal levels. Even if rates don't, prices could break and return more normal affordability. Alternatively, if neither rates nor prices drop, median incomes and salary levels could elevate to make homes more affordable in real terms, even if they increase in price nominally. But rates, prices, or incomes need to adjust. Sales numbers are absolutely in the tank and inventory is growing.

I just don't know that rates will drop much given the amount of treasury issuance in the coming years, as well as lingering inflation pressures and the Fed bringing back the SRF (likely in place of the QE they used in recent years). But who knows, it is always possible.

I also agree with your OP that prices are crazy in a lot of places. Utah home prices are currently hugely distorted and out of whack. I make a very good salary for my career, and even after 8 years of saving, the numbers don't make sense for even a basic 3 bed, 2 bath starter house. Upwards of half a million dollars or $3K per month for a small starter in most Wasatch front counties is insane - most Utah salaries don't match that type of pricing. I'm currently looking for an assumable mortgage, because I can make those prices work at sub 3% rates, but there is no way I can make it work at 7%. The best shot for me may be to assume someone's low rate, because those low rates may not come back like many think they will.