Mortgage Rates Fall to 6.13%

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Mortgage rates fell for the third consecutive week. The retreat has prompted optimism for the housing market—but it may be too soon to say how it will translate for the normally busy spring season.

The average rate on a fixed-rate 30-year mortgage was 6.13% as of Thursday, according to

Freddie Mac
.
The rate, which represents the third week-over-week decline in a row, was the lowest since mid-September.

“Mortgage rates continue to tick down and, as a result, home purchase demand is
thawing from the months-long freeze that gripped the housing market,” Sam
Khater, Freddie Mac’s chief economist, said in a statement. “Potential homebuyers remain sensitive to changes in mortgage rates, but ample demand remains, fueled by first-time homebuyers.”

The news adds to a broader narrative that early data shows the housing market heating up after demand bottomed following mortgage rates’ quick rise in 2022. The Mortgage Bankers Association’s gauge of purchase applications has risen off its early January low in recent weeks, while builder confidence measured by the National Association of Home Builders improved in January for the first time since late 2021.

“Borrower demand, thanks to lower mortgage rates, continues to rise in early 2023,” Mortgage Bankers Association CEO Bob Broeksmit said in a Thursday statement. “Purchase demand is still below year-ago levels, but lower rates and improving affordability are favorable developments for the housing market heading into the spring.”

In a Wednesday release, brokerage

Redfin

 said its seasonally-adjusted measure of pending home sales gained 2.9% in December—the first such gain since October 2021. “The small uptick in pending sales suggests some homebuyers returned to the market at the tail end of 2022 after demand plummeted in the fall,”Chen Zhao, Redfin’s economics research lead, said in a statement.

New home sales data released by the Census Bureau and Department of Housing and Urban Development on Thursday showed a month-over-month improvement to a seasonally-adjusted annual rate of 616,000—up 2.3% month-over-month, but roughly 27% lower than December 2021.

Early housing data has improved, but it’s too soon to say how such signs will affect the spring season, wrote Matthew Walsh, an associate economist at Moody’s Analytics, wrote in a Thursday report.

“Some earlier housing indicators appeared to have bottomed out, but it would be premature to conclude that housing is turning a corner,” Walsh wrote, noting that new home sales data is volatile and measures contract signings, which doesn’t account for cancellations.

The housing market‘s seasonality “is muddling the picture of housing market conditions,” Walsh wrote, adding that, writing that mortgage applications “have found a floor, but this is typical in the final weeks of January as buyers enter the spring buying season.”

Write to Shaina Mishkin at shaina.mishkin@dowjones.com