The average rate on the popular U.S. 30-year fixed-rate mortgage ticked down this week to the lowest level since May 2023, but may need to fall further for the housing market to see significant improvement in demand.

The 30-year fixed-rate mortgage averaged 6.46% during the week ending Aug. 22, down from 6.49% in the prior week, mortgage finance agency Freddie Mac said on Thursday.

It averaged 7.23% during the same period a year ago. A softening tone to incoming economic data implies that rates will continue to ease through the end of the year, Sam Khater, Freddie Mac's chief economist, said in a statement.

Although rates have been steadily declining, the lower rates have "not been enough to motivate potential homebuyers. We expect rates likely will need to decline another percentage point to generate buyer demand," Khater said.

Earlier on Thursday the National Association of Realtors said existing home sales rose 1.3% in July, ending a four-month decline.

"Consumers are definitely seeing more choices, and affordability is improving due to lower interest rates," said Lawrence Yun, the NAR's chief economist. But even with the modest gain, home sales are still slow, Yun said.