Lower interest rates will not necessarily have a moderating effect on the decline in housing values. During the deflation of the last SoCal housing bubble, interest rates declined significantly. However, there apparently was no significant mitigating effect on the collapse of housing values. Similarly, Fed action to bail out the collapsing economy during the great depression did little to mitigate the damage done by rampant speculation and loose credit. I think lower interest rates may result in a secondary equity bubble somewhere else in the economy, but the psychology of the real estate market has changed and I don’t think anything the Fed does can save it. It will run its course.