Mortgage rates hit their last high in October but then fell sharply over the next two months, leveling out at around 6.6% in December. They climbed back over 7% last Friday after another government report on consumer prices came in higher than expected.

“There are two ways to look at recent rate trends in light of the data-driven spikes over the past two weeks,” said Matthew Graham, chief operating officer at Mortgage News Daily. “On one hand, we can take solace in the fact that rates are still almost a percent lower than they were in October. On the other, the optimism for lower rates in 2024 has abruptly given way to skepticism.”

The drop in rates at the end of last year had caused optimism in the housing market as higher interest rates, coupled with high home prices, sidelined buyers in the fall. Sales of newly built homes soared 8% in December, according to the U.S. Census Bureau, with lower rates acting as the primary driver.

Homebuilder sentiment, based on an index from the National Association of Home Builders, has been rising for the past three months as builders reported that lower interest rates were driving buyer traffic to their model homes. In February’s report, builders said they expected mortgage rates to continue to moderate in the coming months.

“Buyer traffic is improving as even small declines in interest rates will produce a disproportionate positive response among likely home purchasers,” said NAHB Chairman Alicia Huey, a home builder and developer from Birmingham, Alabama. “And while mortgage rates still remain too high for many prospective buyers, we anticipate that due to pent-up demand, many more buyers will enter the marketplace if mortgage rates continue to decline this year.”

Demand has been strong, despite high home prices and very low supply of homes for sale. Adding to that, President’s Day weekend is considered to be the unofficial start of the all-important spring housing market.

But this new upswing in rates could drive buyers away. In January, when rates flattened from their declines, both signed contracts on existing homes and new listings weakened, according to Redfin, a national real estate brokerage.