On July 11, the 10-year Treasury peaked at 4.29% before closing that day at 4.19%. At 11 a.m. this morning, the yield was at 4.17%.

Lender Price product and pricing engine data posted on the National Mortgage News website put the 30-year fixed at 6.85% at that time, compared with 6.936% one week earlier.

While mortgage rates are heading in the right direction, homebuyers have yet to respond, with purchase application demand roughly 5% below its spring level, when rates were approximately the same as they are now, said Sam Khater, Freddie Mac's chief economist.

"This is not uncommon: sometimes as rates decline, demand weakens, and the apparent paradox is driven by buyers making sure rates don't decline further before they decide to purchase," Khater said in a press release.

Zillow's rate tracker put the 30-year FRM at 6.36% as of 11 a.m. on Thursday morning, down 3 basis points from Wednesday and 12 basis points from the previous week's average of 6.48%.

"Home shoppers are getting some slight relief as mortgage rates are now comfortably below the 7% mark, and they could stay below that threshold if next week's inflation data continues to move in the right direction," Orphe Divounguy, senior economist at Zillow Home Loans, said in a Wednesday evening statement.

Inflation is trending downward, the latest data showed. "As inflation and inflation expectations move lower, the current Fed policy stance has become more restrictive and could risk damaging a labor market that has so far supported consumers," Divounguy said.

Nearly all economists surveyed in July by Wolters Kluwer believe the Federal Open Market Committee will cut short-term rates during 2024, fewer said that would happen in September, pushing off those expectations to either the November or December meetings. In the June survey, 9% said the first cut would take place at the July meeting; that fell to zero the following month.

"A number of Federal Reserve officials have reinforced the consensus view that as inflation continues to cool — like it has over the past three months — the time to 'lower the policy rate is drawing closer,' as Federal Reserve Governor Christopher Waller put it," Divounguy said. "Treasury yields and the mortgage rates that tend to follow them could ease further, especially if the labor market shows signs of loosening further."

Annual home price growth slowed in the second quarter, 6.9% from an upward revised 7.3% for the first quarter, Fannie Mae reported.

"Elevated mortgage rates and ongoing affordability constraints are increasingly limiting homebuyer demand and thus dampening the pace of home price appreciation," Doug Duncan, Fannie Mae chief economist, said in a press release.

"Meanwhile, the number of homes available for sale is rising in many metro areas, which is also dampening home price growth. While we expect home price growth to decelerate further in the coming quarters, a still-tight inventory of homes for sale and stretched affordability remain significant challenges and, in our view, are likely to constrain mortgage demand and home sales for the foreseeable future," Duncan said.

As for the near-term future, next week's Personal Consumption Expenditures — the preferred metric of the Fed — should result in investors adjusting their inflation forecasts. If the PCE rises, mortgage rates are likely to go higher too, Divounguy said.

The Mortgage Bankers Association said mortgage rates should move lower going forward.

"Signs of cooling inflation, and the increased likelihood of the Federal Reserve cutting rates this fall, should cause mortgage rates to move lower, which would be welcome news to prospective homebuyers who may be unwilling, or unable, to jump into the housing market at today's costs," Bob Broeksmit, the MBA's president and CEO, said in a Thursday morning statement on its Weekly Application Survey released the prior day.