Rate: 6.32 percent (30-year fixed) Average Points: 0.39

Mortgage rates were modestly lower this week, bucking a recent trend of rate increases.

The average 30-year fixed rate fell 9 basis points from the previous week, to 6.32 percent. A basis point is one-hundredth of a percentage point.

Meanwhile, the average 15-year fixed — a popular option for refinancing — fell 8 basis points, to 5.79 percent. The average jumbo 30-year fixed was unchanged at 7.43 percent.

Adjustable-rate mortgages were mixed this week. The one-year adjustable-rate mortgage fell 2 basis points, to 5.47 percent. The popular 5/1 ARM rose 4 basis points, to 5.72 percent.

This week also featured a rare twin dose of good news for the U.S. housing market. Mortgage application activity for the week ending Feb. 29 rose for the first time in four weeks, increasing a seasonally adjusted 3 percent from the week before.

Also, overvaluation of home prices appears to be declining sharply in many of the nation’s housing markets, according to a joint-U.S.-housing-valuation analysis by National City Corp. and Global Insight.

Of the 330 metropolitan areas surveyed, 21 had housing markets described as “overvalued” during the fourth quarter of 2007. That’s a decline from a peak of 58 overvalued markets registered in a 2006 survey.

More importantly, the 21 overvalued markets represent just 4 percent of the nation’s housing units, compared to the 20 percent of the nation’s housing units that were overvalued in 2006.

However, the valuation study also provided some more discouraging news for those hoping for a housing recovery later this year.

Home prices declined for the second straight quarter in late 2007, with 291 of the 330 markets sinking, according to the study.

Nationwide, housing prices declined at an annual rate of 5.1 percent, with the worst declines occurring in California, Florida and Michigan.

The study’s authors concluded that despite improved valuation levels, a combination of tightening credit and overall economic weakness is likely to depress real estate returns throughout this year.