WATCH: More videos from Jim Cramer on TheStreet TV | More videos from Jim Cramer

NEW YORK (MainStreet) — As mortgage rates fall to a seven month low and home prices start to settle, some investors wonder if this combination will be a boon to the housing market.

Freddie Mac said average rates on 30-year fixed mortgages fell to 4.12%, compared to 4.14% from last week. The S&P/Case-Shiller Index, which tracks national home prices, rose only 0.17% during the first quarter.

Also See: Fannie Mae and Freddie Mac Face Uncertain Future, Despite Profitability

After all, the housing market has stumbled over the past several months, largely due to cold weather. But analysts expected stronger housing data around this time, when poor weather conditions are no longer part of the equation, pointing to a potentially more systemic issue in the housing market, beyond cold weather.

On Thursday, pending homes sales, which tracks homes under contract, rose only 0.4%, according to the National Association of Realtors.

"Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers' confidence," says Lawrence Yun, chief economist at the National Association of Realtors.

Other weakness in the housing market surrounds housing starts, or the volume of new construction homes, which showed strength for multi-family homes and weakness in construction of single-family homes, according the latest reading released in mid-May.

Will lower borrowing costs and home prices make things easier for new home buyers?

"We've come through the initial period of a pretty rapid recovery and it's now beginning to slow down," says David Blitzer, managing director and Chairman of the S&P Index Committee. "I would expect more supply to come in over the summer and houses to stay on the market a little longer."

Even though home prices are cooling, the S&P/Case-Shiller National Home Price Index is still up 10.3% year-over-year. The jump in prices will encourage sellers to list their homes, many of whom were holding out in order to get the best price, providing more inventory for buyers. Buyers will benefit from the stabilization of prices and greater number of homes for sale.

First-time homebuyers typically get the short end of the stick. "They don't have the cash from a previous home sale to help them make a down payment on a home, so this is where the squeeze is coming from," Blitzer adds. Not to mention, the high levels of student loan debt that first time home buyers tend to have, which make them less attractive to lenders.

Aside from the challenges first-time homebuyers face, credit still remains tight according to the minutes of April's FOMC meeting: "Mortgage credit conditions generally remained tight over the intermeeting period, though signs of easing continued to emerge amid further gains in house prices." Tighter credit typically means potential buyers need to have higher credit scores and greater down payments. Though some banks in recent months have been relaxing their standards, per a MainStreet report from late April, and as the aforementioned minutes suggest.

"This is all part of a market that's shifting down," Blitzer warns. "Inflation plus a 10% jump in prices isn't sustainable."

- Written by Scott Gamm for MainStreet. Gamm is author of MORE MONEY, PLEASE.