The most recent data released by the Mortgage Bankers Association (MBA) showed a notable rise in mortgage applications in the United States. This increase of 3% from the previous week marked the largest weekly surge in two months. The rise came at a time when the average contract interest rate for 30-year fixed-rate mortgages dropped to 7.41%, the lowest it has been in two months. Joel Kan, the MBA’s vice president and deputy chief economist, explained that the decline in mortgage rates was triggered by a reduction in U.S. bond yields, which were influenced by evidence of a softer economy and cooling inflation. Despite the significant increase in mortgage applications, they still remain at very low levels. This surge in applications may be an indication of a potential shift in the housing market, driven by more affordable interest rates and cooling inflation. Morgan Stanley’s experts predict that the decrease in mortgage rates could result in increased availability of homes for sale and a modest 3% drop in home prices by the end of 2024. However, the sustainability of this trend remains uncertain, especially considering the low levels of refinance applications. The news of the rise in mortgage applications caused real estate stocks to rise, with Prologis Inc., American Tower Corp., and CoStar Group Inc. among the best performers of the day. The iShares Mortgage Real Estate ETF also showed a similar positive performance.