Mortgage rates lower, too? Not so fast
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From Walters' perspective, the most welcome change will happen in bank-to-bank lending. There will be more of it, which will "un-seize" the jammed credit markets that have made it hard to find a jumbo mortgage in the last couple of months. Jumbo mortgages are home loans exceeding a "conforming limit" that changes annually; this year, the conforming limit is $417,000.

"More people will get loans as a result of this than they could get before this," Walters says.

Dean Baker, an economist with the Center for Economic and Policy Research, in Washington, D.C., doesn't expect much of a break in mortgage rates, either. "Prime mortgage rates may go down a small amount," he says. "But anything that's not prime and conformable -- I'd be surprised if you'd see any downward movements."

Impact on home prices
As Baker sees it, the problem is that house prices have more room to fall. They've already gone down in many markets. Mortgage companies are wary of lending to homebuyers who make small down payments, because those owners could quickly end up owing more than their houses are worth if prices continue to fall.

The Fed's rate cut "is pushing on a string," Baker says. "It's not going to prevent house prices from falling. Housing construction and home sales and house prices will continue to decline."

Everyone knows that some people are harmed when home values fall. Homeowners with adjustable-rate mortgages discover that it's impossible to refinance their suddenly high-rate mortgages when they owe more than their houses are worth.

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Home sellers hate it when they end up getting less than they would have if they had sold at the top of the market.

But falling prices create winners, too -- especially when mortgage rates are relatively low, as they are now.

"You have large chunks of the population who stand to gain from falling prices for real estate," Baker says. "As a broad group, you can say everyone who's a renter and might look, at some point, to buy." This especially goes for young people in bubble markets in Florida, California and the Northeast.

Falling prices could benefit Baker, too. He used to own a condo in the District and sold it a few years ago because he was convinced that housing was in a bubble that would burst. Prices continued rising after he sold, and they've fallen back to around where they were when he sold. But he expects values to fall even further -- and maybe someday he will buy another condo at a bargain price.