The demand for mortgages dropped by nearly 10% in the final week of 2023, signaling a housing market that is still recovering entering 2024.

According to the Mortgage Bankers Association's seasonally adjusted numbers for the week ended Dec. 29, mortgage applications were down 9.4% as potential homebuyers deal with high rates and low inventory.

Although down from its previous high of more than 8% in October 2023, the average rate for a 30-year fixed mortgage in the U.S. ended the year at 6.76%. Would-be homebuyers appear to be waiting for lower rates and/or lower home prices.

"The recent decline in rates has given the housing market some cause for optimism going into 2024," said Joel Kan, MBA's vice president and deputy chief economist, told CNBC, "but purchase applications have not yet picked up in response."

Housing analysts are hoping for the market to bounce back in 2024, as a combination of lower mortgage rates, less patient buyers, and a higher supply of homes helping spring the recovery.

"Heading into the new year, the economy remains on firm ground with solid growth, a tight labor market, decelerating inflation, and a nascent rebound in the housing market," Sam Khater, Freddie Mac's Chief Economist, said in a statement.

Mortgage