Yes, interest rates on the long end of the yield curve have come down a bit over the last couple of weeks. There are numerous factors contributing to the drop in yields including a shift to safe quality assets in the face of poor economic data (job growth, GDP, inflation, etc).

However, I don’t thing the long end of the yield curve will have an impact on SoCal housing depreciation. The SoCal market has relied extensively on the short end of the yield curve through the use of ARMs. The yield on the 10 year hasn’t moved nearly as much as the short end – driven by the FOMC’s two year tightening campaign. Look at some historical data for US Treasury rates and you’ll find that in the years following 1989, the 10 year actually dropped. But that didn’t save SoCal.

The long end of the curve will probably not move dramatically in any direction. Japan reported lower inflation data and that could have an impact on the BOJ not raising interest rates – therefore prolonging the Japanese Carry Trade and maintaining demand for the Long Treasury.

Investor psychology has already been impacted, the downturn is underway and interest rates will not help. Remember, Japan dropped rates to zero and that couldn’t stop their real estate troubles….