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Things are starting to look up for homebuyers on a budget.

Buyers with a monthly budget of $2,500 can buy a $400,000 home for the first time since September 2022 as mortgage rates fall from their highs in late 2022, according to a report published Thursday by the online brokerage Redfin.

The average daily mortgage rate was 5.99 percent on Feb. 2, according to Mortgage News Daily — the first reading below 6 percent recorded since September. The downward trend in mortgage rates has meant that a buyer with a $2,500 budget can afford to spend roughly $35,000 more on a house now than they could in November when rates peaked at 7 percent.

Homebuyers on that budget still have $95,000 less in buying power than they did about a year ago when rates were at 3.5 percent. But mortgage rates trending downward and bond reserve investors predicting that the most recent interest rate hike from the Federal Reserve could be its last have been enough to give some buyers the confidence to return to the market.

“We expect more homebuyers and sellers to gradually return to the market by springtime, but mixed economic news and mixed reactions from the market mean the recovery will be uneven,” Redfin Economics Research Lead Chen Zhao said in a statement. “The Fed’s interest-rate hike this week, for example, is both promising and disappointing. The Fed hiked rates at a slower pace than last year, which means mortgage rates are unlikely to rise further. But it also signaled ongoing rate increases to fight inflation, which will likely prevent the steep mortgage-rate decline that some optimistic buyers have been waiting for.”

Mortgage purchase applications are up 15 percent from their early November trough but declined 10 percent week over week during the week ending Feb. 2, according to Redfin. Redfin’s in-house measure of housing demand, the Homebuyer Demand Index, reached its highest level since September during the four weeks ending Jan. 29. It was up 5 percent from a month earlier but down 25 percent from a year earlier.

Email Ben Verde