As long-term bond yields spiked Tuesday morning, Apollo's chief economist issued a dire message about the weak housing market's impact on the economy and stocks.

High mortgage rates and home prices have quashed buyer demand, Apollo Chief Economist Torsten Sløk wrote in a Tuesday note accompanying the asset manager's 127-page housing outlook.

"Demand for housing is unfortunately under significant pressure," Sløk told Barron's by phone.

Charts in the economist's report outline the various warning signs: Households have stopped moving as the majority can only afford a home priced at $300,000 or lower, the report notes. As mortgage rates hover just below 7%, more than double their pandemic lows, price growth is largely stuck-except for the high price tier. Luxury buyers are the least dependent on mortgage financing.

A weak housing market "has a number of consequences," the economist says. The sector will contribute little to GDP as fewer homes are built.

The stuck housing market isn't so bad for homeowners, who have access to high levels of equity that they can borrow against, notes Sløk. But there's a big difference between those who already own homes and those who would like to.

"The insiders, of course, continue to do exceptionally well with home prices going up," he says. "Outsiders in the housing market, of course, continue to not do well because it has become so expensive for them to get a new mortgage."

A weak housing market also provides less buffer for stocks should artificial-intelligence spending slow down, Sløk says.

"If the business cycle does begin to slow down, then we would, of course, also begin to have a negative impact on the stock market overall-especially if it is the combination of AI spending slowing, and, at the same time, the negative effect from housing and autos also slowing," he says.

Lower long-term interest rates are key for housing market activity to improve, notes Sløk.

This week's higher bond yields, should they hang around, mean housing activity is likely to get further stuck in place. The 10-year Treasury yield, a key component of the 30-year fixed mortgage rate, rose to 4.797% Tuesday morning-the highest yield since January 2025. Investors can expect 30-year fixed mortgage rates, which Mortgage News Daily gauged at 6.87% on Monday, to move higher in response.

The continued gain in yields doesn't help home-builder stocks, which slumped amid higher bond yields on Monday. The iShares U.S. Home Construction exchange-traded fund, which tracks the industry, was down 1% shortly after the market opened, on pace for its lowest close since June 10, 2026, according to Dow Jones Market Data.

Shares of three large builders, Lennar, D.R. Horton, and PulteGroup, were all on pace for their lowest closes since late July.