The housing market is starting the new year with a mixed bag of news. While mortgage rates have risen slightly, demand for homes is increasing, giving economists cautious optimism.

According to Freddie Mac's latest Primary Mortgage Market Survey released on Thursday, the average rate for the benchmark 30-year fixed mortgage inched up to 6.66%, compared to 6.62% the previous week. This is a significant increase from the 6.33% average rate a year ago.

On the other hand, the rate on the 15-year fixed mortgage saw a second consecutive decrease, averaging 5.87% after being at 5.89% last week. This represents a notable increase from 5.52% a year ago.

Freddie Mac's chief economist, Sam Khater, explained that despite the marginal increase in mortgage rates, homebuyer demand has gone up. However, the persistently tight inventory and rising prices are creating affordability challenges for potential buyers. Khater advised potential homebuyers to explore existing state and local resources, such as down payment assistance programs, to help offset closing costs.

The Mortgage Bankers Association (MBA) also provided positive news, reporting a 9.9% increase in mortgage applications for the week ending January 5, compared to the previous week. This surge in activity was driven by gains in both refinance and home purchase applications.

MBA President and CEO, Bob Broeksmit, expressed optimism for the housing market in the coming months, suggesting that if housing supply continues to rise and interest rates remain below 7%, renewed activity can be expected, particularly as we head into the spring season.

While the housing market continues to face challenges in terms of affordability and inventory, the increase in demand and positive outlook from economists indicate that the market may be on the path to recovery. Buyers are advised to explore opportunities for assistance and closely monitor market trends.