The average U.S. rate for 30-year fixed mortgages fell to 5.3 percent after the Fed's emergency reduction and that has led to an increase in inquiries to local mortgage brokers.

At press time, the Fed was studying its monetary policy and was expected to make another interest rate announcement Wednesday.

The hope is that a continuing drop in mortgage rates will prompt some to purchase a new home and others to refinance - lowering their monthly payments or preventing an adjustable rate from resetting at a higher rate. That could keep more people in their homes rather than losing them to foreclosure and increasing inventories further.

"It is great news for once because there has been so much negative news about the housing market," said Dennis Smith, president of Home Builders Research who tracks the housing market. "I think it is a psychological boost because the purchase of a home is an emotional decision. It will give consumers some confidence."

Smith said any boost the market gets from the lowering of interest rates won't be enough to help it rebound. Instead, it can help stop further declines, he said.

New home sales fell 55 percent in December compared with December 2006, and the 1,278 sales were by far the lowest of any month of the year. Existing home sales and prices also continued to decline in December, with sales down 42 percent and prices down 11 percent compared with December 2006.

"Every time they lower rates, we have seen traffic get better," said Tom McCormick, president of Astoria Homes, which recently unveiled new models in Southern Hills in Henderson and plans to so the same in other parts of the valley despite the slowdown. "I think there are a huge number of people waiting for home prices to continue falling and interest rates to go down. I think people will realize it is time to make their move because there is no builder inventory left."

Builders continue to struggle in Las Vegas and the rest of the country and need a boost in home sales.

Ryland Homes, the No. 14 ranked homebuilder in the local market, last week reported a fourth-quarter net loss of $201.9 million - 10 times greater than analysts' estimates - after writing down the value of land and inventory by $242.7 million. The largest loss of any market was Las Vegas with $44 million.

"Cancellations continue to be a serious headwind for the industry and Ryland," said Chad Dreier, chief executive of the California-based builder. It said cancellations continue to be a problem as buyers walk away from orders.

Many agree that although the nation isn't officially in a recession, the housing market is, especially in Las Vegas.

The Fed should have taken more aggressive action a year ago instead of waiting for the housing market and economy to worsen, said Steve Bottfeld, executive vice president of Marketing Solutions.

But the move isn't for naught, Bottfeld said. It should have a positive effect on the Las Vegas housing market within six months by making payments even more affordable. This will help more people refinance and stave off foreclosures, he said.

"It is important because it sends a signal the federal government is finally prepared to begin dealing with this crisis, and now it is a crisis," Bottfeld said. "Had (federal officials) acted sooner and in a more meaningful manner, the current situation could have been avoided."

Not everyone sees the interest rate cut in the same light.

Housing analyst Brian Gordon, principal with Applied Analyst, said the rate cut, more than anything, helps those with home equity loans whose payments regularly adjust. The Fed's action alone is not enough to lower mortgage rates.

Fixed rates are set by investors in mortgage-backed securities based on economic and inflation expectations.

Even if mortgage rates go down, that could have a modest effect on the market, but it's only one element in addition to pricing, inventory and demand, Gordon said.

Since the cut last week, phone calls have doubled to the offices of National Lenders Service, a Las Vegas mortgage broker. But Steve Schauer, its president, said just because interest rates drop won't mean homeowners will be able to refinance their homes. Many home values have dropped to the point owners are unable to refinance because their homes are worth less than their outstanding loans, he said.

The lower rates will spur people to buy, but they still must overcome the challenges of the credit crunch, Schauer said.

Only those with credit scores of 660 or higher get loans without a down payment, while those under 620 have to put down at least 5 percent, he said. And unlike during the housing boom, no one can get a loan without full documentation, he said.

John Restrepo, a principal with Restrepo Consulting Group, said that the credit crunch doesn't disappear because of the lowering of interest rates, and the jury is still out on how much the rate cut will help the economy, especially since Europe is not lowering interest rates.

"If people feel uncomfortable about their jobs, they are not going to want to take on a new mortgage," Restrepo said. "Buying a new house ties into consumer confidence."

In addition to the rate cut, there was other good news for the housing market. A stimulus package announced by the White House and Congress calls for lifting of the size of home loans that may be bought or insured by Fannie Mae or Freddie Mac to $729,750 for one year.

They are currently capped at $417,000. The measure would also permit the Federal Housing Administration to insure loans up to the same level.

The measure is expected to make the jumbo loans more affordable because they will be more attractive to investors who otherwise have shunned purchasing homes loans not insured by Fannie Mae or Freddie Mac.