I don't get that part. If people are using the money to buy houses, then the money is going from one bank to another (or in some rare cases, to a seller who is likely to just put the money back into another house). I don't see how this makes the money "flow" except for a small percentage going to the agent/brokers and the bank for closing costs.
Just imagine someone who's facing foreclosure if they can't sell. They're putting every cent they can into their mortgage, and my family is putting every cent into our deposit. Along come my family, who aren't planning on buying for another year, partly to wait until interest rates are lower before we lock it in for 30 years. But if they drop the interest rate to 4.5% we'll buy much more quickly to lock in that low rate. So the seller doesn't get foreclosed on, they move somewhere cheaper and start spending money on groceries and restaurants instead of their huge mortgage, we move in and get a deck built and some curtains, the deck builder takes his family out to the ball game and buys them hot dogs because he had a big job this week, the curtain shop pays the wages of the Saturday morning part-time employee etc, etc.