In my humble opinion, lower interest rates may help but not solve the problem. I believe the problem is the lack of lending. The banks are saying that they will not lend until prices stabilize. Prices will not stabilize until there is lending. Its a circular argument. It reminds me of the S&L crisis in the 80s. It took a few years for things to totally unwind after the excessive lending practices of the S&Ls in the early to mid 80s. Based on my discussions with mortgage brokers, nonconfirming loans (e.g. above $417,000) are not being made at this time. While 'no docs' are out (good. they never should existed imho), but 'stated income' mortgages for confirming loans are still be written. Note: many small business owners have to use stated income to buy a home. So there are virtually no mortgages being made for expensive home markets like on the East and West Coast. The folks with the ARMS were talked into getting ARMS in order to save money in the short term. The pitch was to refinance the ARMS once interest rates start increasing. Lower interest rates will certainly help them make their monthly payments, but will not produce buyers to get out of their situation if they overbought. Congress is trying to raise the confirming loans amounts up to around $700k I believe which would also help a great deal of people. I hope it passes. The sad part of this is that at least some homeowners in California and elsewhere were tapping home equity loans to buy properties elsewhere or spend the money. I am always surprised to see advertisements at the local bank trying to make home equity loans to consumers in order to 'spend' not 'invest' the money. One bank has a sign saying something like "You deserve that vacation. Take out a home equity loan." I find the practice shocking, as home equity is one of the primary sources of retirement for many people. And pitches like that are preying are those who lack understanding and/or discipline in their financial affairs. What ever happened to good old savings and then spending?  And aren't banks supposed to encourage prudent financial practices, or at least not encourage bad financial practices?....Just some observations. www.oilandgasinvest.com