US mortgage rates fall. How big a boon for housing?

After a three-week run-up, US mortgage rates eased down this week, a small but welcome boost to a still-struggling housing sector .

The rate for a fixed 30-year home loan averaged 5.38 percent, mortgage giant Freddie Mac reported Thursday, down from 5.59 percent last week but still above the rate the week before.

The decline should come as welcome news – not only for consumers, but real estate agents and homebuilders as well – because the rise in interest rates had begun to slow home purchases.

Loan applications by would-be home buyers fell 3.5 percent last week, the Mortgage Bankers Association reported Wednesday. That was the first decline in four weeks.

The housing industry has begun to see signs of stabilization, but a very low level. The big question is: If would-be home buyers can no longer lock in rates below 5 percent for a conventional 30-year mortgage, which they were able to do from March through May, will they keep snapping up houses?

"It’s still too early to tell whether the decline in the housing market activity has hit bottom," wrote Frank Nothaft, chief economist for Freddie Mac, in his weekly commentary.