Positive news has emerged for U.S. homebuyers navigating the housing market, as the average interest rate on 30-year fixed-rate mortgages with conforming loan balances (up to $766,550) declined to 6.50% in the week ending Aug. 16, according to data released Thursday by the Mortgage Bankers Association.

This represents the lowest level since early May 2023. The decrease in mortgage rates aligns with a dip in long-term Treasury yields, influenced by market expectations of multiple rate cuts from the Federal Reserve this year.

Last week, the 30-year Treasury yield dropped by 7 basis points, currently on track for a fourth straight month of declines. Month-to-date the long-dated Treasury bond has seen its yields tumble by about 25 basis points to the current 4.05%.

Mortgage Applications Dip As Homebuyers Take A Breather

However, this rate drop did not translate into an increase in mortgage application activity.

After two consecutive weeks of robust growth, mortgage applications fell sharply, signaling that many potential homebuyers are still in a holding pattern, likely waiting for more clarity on the Federal Reserve's future policy direction, which could be hinted at during the upcoming Jackson Hole Symposium.

Read Also: Jackson Hole Preview: 5 Important Questions Ahead Of Jerome Powell's Fed Speech

Despite the reduced 30-year fixed mortgage rate, overall mortgage applications saw a 10.1% decline compared to the previous week, partially erasing the robust 25% gain recorded over the prior two weeks.

Refinance applications, which tend to be more sensitive to fluctuations in interest rates, dropped by 15%, cutting into the 35% surge observed in the previous week.

Similarly, applications for home purchase mortgages fell by 5%, building on the 8% decline from the prior week.

Thursday's Real Estate Stock Movers

The broader real estate sector, as tracked by the Real Estate Select Sector SPDR Fund (NYSE:XLRE), was up 0.3% during Thursday premarket trading, on track to notch the highest level since September 2022.

Top-performing stocks within the XLRE ETF were CBRE Group, Inc. (NYSE:CBRE), up 1.1%, and Crown Castle Inc. (NYSE:CCI) , up 0.9%.

Taking a closer look at mortgage-linked industries, the iShares Residential and Multisector Real Estate ETF (NYSE:REZ) was flat, after closing Tuesday at the highest level since mid-September 2022.

Major premarket gainers within the REZ ETF included Healthcare Realty Trust Inc. (NYSE:HR), up 1.3%, Sabra Health Care REIT, Inc. (NYSE:SBRA), up 1.1%, and Universal Health Realty Income Trust (NYSE:UHT), up 13%

Other mortgage sensitive stocks, such as Redfin Corp. (NASDAQ:RDFN) and Zillow Group Inc. (NASDAQ:ZG), were 1.2% and 0.2% higher, respectively.

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Image created using artificial intelligence via Midjourney.