Mortgage rates fell below 7% for the first time since August, with the 30-year fixed rate sitting at 6.95% as part of a seven-week decline. A positive for potential homebuyers, Freddie Mac economists only expect a “gradual thawing” of the US housing market in 2024 even if rates begin to cool.

Yahoo Finance’s Julie Hyman and Josh Lipton take a closer look at how these rates could continue to impact housing market inventories in the new year.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

- Well, there's good news for homebuyers. Mortgage rates falling below 7% this week for the first time since August. The 30-year fixed sits at 6.95%.

Just like we've been seeing in the broader treasury market, the momentum has been to the downside here, I believe. What is it? Seven straight weeks that we've now seen this figure go down, so that's good news for people who want to buy a house.

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- Yeah, I mean, in terms of the drop, here-- I mean, listen, we use different sources. I go to "Mortgage News Daily." They actually have the 30-year fixed at 6.62%. So listen, if you look at that number, Julie, you would still say that's a lot higher than many folks are still probably used to seeing.

There's a lot of people watching this right now probably locked in at 3%. I'm guessing they love this segment. I know I would.

I don't know what you're talking about, Josh.

- No, no. I know. No. It's crazy to you. You have no clue. But it is certainly better than what we were saddled with not too long ago-- 8%. So it's moving in the right direction for a lot of folks. And you can-- I mean, listen, you can expect mortgage applications to pick up off that headline.

And I guess the question becomes where you think you head from here. Like, next year, do you think you could head back to 5%? Below?

- Well, I look at the commentary from Freddie Mac's chief economist that accompanied this-- the headline here. And what he pointed out is we likely will see a gradual thawing of the housing market in the new year.

The word I fixate on there is gradual, right? We are not expecting to see even with a comedown in rates that things are going to just flip on--

- --because there's no inventory.

- There's no inventory because rates are so high that people don't want to pay those rates. And you know, what we've talked to different guests about is what's that tipping point? What's the line? Is it 5%? Is it lower than that?

- Well, what's the line where someone who's locked in at 3% says, you know what--