"Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates," said Sam Khater, Freddie Mac chief economist, in a press release. "Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market."

The Mortgage Bankers Association's most recent Weekly Application Survey found a 10% week-over-week increase in submissions.

"Housing inventory remains tight and home prices are elevated, but first-time buyer interest is strong this spring," Bob Broeksmit, the MBA's president and CEO, said in a Thursday morning statement. "FHA purchase applications jumped 16%."

Mortgage rates are starting to come down broadly as the Fed takes a more tempered approach towards quantitative tightening, said David Adamo of Luxury Mortgage.

"There is still a supply/demand imbalance but with construction of rental properties at an all-time high and rents coming down and vacancies rising there is an opportunity to fill the gap in supply by converting rental properties to available for sale housing stock to meet demand," said Adamo. "The expectation is that mortgage industry origination volume increases significantly this year and next as we recover from the post-pandemic environment."

The benchmark 10-year Treasury yield peaked at 4.32% on Feb. 27. Since then, albeit with some ups and downs, it has dropped to 4.11% just before noon on March 7.

Zillow's mortgage rate tracker had the 30-year FRM at 6.45% on Thursday morning, down from the prior week's average of 6.63%.

"Despite an uptick in inflation in January, Fed Chair Jerome Powell reaffirmed that the peak rate of the hiking cycle has been reached and that monetary policy is sufficiently tight to bring inflation down to the Fed's 2% inflation target," Orphe Divounguy, senior macroeconomist at Zillow Home Loans, said in a statement issued Wednesday night.

"This should ease anxieties that the Fed's inflation forecast may have changed and that it would not be prepared to recalibrate its key policy rate later this year," Divounguy continued.

But it will not be a straight line path to lower yields for the 10-year Treasury and falling mortgage rates.

"Expect more rate volatility ahead as the Fed and investors continue to wait for more conclusive evidence of a return to low, stable and predictable inflation," Divounguy said. "This week's employment and wage growth data release will likely cause some repricing activity."