Mortgage demand rose for the third consecutive week as interest rates continued to decline. The Mortgage Bankers Association reported that total application volume increased by 7% compared to the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell to 6.2% from 6.23%, with points rising to 0.69 from 0.67. This rate is approximately half of what it was one year ago.

Applications to refinance a home loan saw the greatest increase, rising by 15% compared to the previous week. Although they were still 77% lower than the same week last year, it’s declining fast.

Applications to purchase a home increased by 3% for the week, but were 39% lower than the same week a year ago. Homebuyers are beginning to return to the market as home prices decrease.

However, the low inventory remains a challenge for potential buyers. Joel Kan, an economist with the MBA, stated that if interest rates continue to fall and home prices cool further, it is expected that more potential buyers will enter the market as they wait for affordability challenges to subside.

Mortgage rates have slightly increased to begin this week, but remain within the recent lower range. Real estate brokerages such as Redfin are reporting an increase in buyer interest with rates at these levels, but the housing market remains in a state of uncertainty as potential sellers and buyers hesitate and wait to see where prices will stabilize.