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Whenever the Fed cuts the federal funds rate, my phone ring continously from customers wanting to take advantage of a drop in mortgage rates. Things are not that simple. Mortgage rates go up and down according to investors expectations of long-term inflation. Simply put, if investors think inflation will accelerate, mortgage rates rise.

Mortgage rates often anticipate Fed rate moves instead of reacting to them. Two months ago, in mid-July the average rate on a 30-year, fixed rate mortgage in Bankrate.com's weekly survey was 6.82 percent. This week, it was 6.32 percent. Exactly half a percentage point lower. The Fed just reduced the federal funds rate by the same margin of a half a percentage point. When the mortgage rates decline, they are reacting to market forces and the fed eventually plays catch-up.

Falling house values pose a severe problem for homeowners who made small down payments a few years ago and for adjustable-rate mortgages. Hundred of thousands of people find themselves in a situation where their ARM rates are rising, yet they can't refinance their mortgages because they owe more than their houses are worth. Thankfully this phenomena has not hit our areas yet.

Falling prices create winners too especially when mortgage rates are relatively low as they are now. As a broad group anyone who is a renter and might look to buy at some point might take advantage of current market situations.