M
ortgage rates have continued to rise, reaching their highest level since mid-August, with the 30-year fixed-rate mortgage averaging 6.44%. However, experts believe that "the worst may be behind us" for the market as a whole. This is partly due to improving builder optimism, which could lead to more construction and eventually alleviate the housing shortage.

    Key points:

    * The 30-year mortgage rate has increased for three consecutive weeks, with the current average of 6.44% being significantly higher than before the Federal Reserve's interest rate cut.

    * Homebuilder sentiment is up, suggesting that builders anticipate a moderation in inflation and mortgage rates over the next few months.

    * Despite this optimism, the housing market recovery will likely be slow due to low supply and affordability challenges.

    * Inventory gains have slowed down, which could stymie any rebound in demand.

    * The recent rise in mortgage rates has led to a decline in applications to finance a home, with refinance applications falling 26% week-over-week.

    Builder sentiment is improving, with the National Association of Homebuilders' confidence index rising for the second straight month. This suggests that builders are feeling more optimistic about market conditions in 2025, but uneven declines in rates and tight lending conditions could make it harder for them to source materials.

    Home prices continue to rise, but at a slower pace than in recent years. First American's Home Price index estimates a 3.9% year-over-year increase in September, while Fannie Mae's index reported a 5.9% increase in the third quarter. This is further evidence of an ongoing issue with tight supply.

    Experts believe that for the housing market to regain momentum, it will take both a significant increase in the number of homes on the market and continued affordability improvements. Until then, the road to recovery will likely be slow.