Thw Washington Post reports on interest rates. "The U.S. Federal Reserve may need to raise interest rates again to tame inflation and the ECB can afford to hike euro zone rates further now that it has proof of solid economic recovery, the OECD said on Tuesday. The Organization for Economic Co-operation and Development said the U.S. central bank had to get to grips with stubbornly high inflation, notably fueled by rising labor costs, and this could prove a more real concern than the spectre of a housing market collapse."

"'There's a trade-off. You don't want to precipitate a crash but at the same time you want to rein in inflation,' OECD chief economist Jean-Philippe Cotis told a news conference."

The Chicago Tribune. "With real estate markets sinking fast and the job market in low gear, critics of the Federal Reserve are warning that the central bank has overtightened the nation's monetary spigot. Fears are growing that the Fed has dried up too much of the economy's activity, all in the name of choking off inflation."

"For months, Americans have been leaning on credit cards to shell out more money than they make. But economist Peter Morici says that trend can't last indefinitely. 'With savings so low, higher interest rates, especially mortgage rates, could cause an abrupt change in consumer behavior,' he says."

"Such a risk is so worrisome, says Morici, a professor at the University of Maryland School of Business, 'the Fed should not raise interest rates further. Sometimes the best monetary policy is to do no harm.'"

The Post again. "In a year when politics is being roiled by angry debates, it might seem odd to imagine the midterm elections being waged over square footage and closet space." "Flat wages and rising debt nationally have converged to leave millions of middle-class households feeling acutely vulnerable to bumps in their financial planning. The most visible of these are rising energy prices and a softening housing market."

"A less obvious but powerful variable is the interest paid by people carrying credit card debt or mortgages whose monthly payments vary with interest rates. People buffeted by these trends have given rise to a new and volatile voting block. 'People like this are making a large ripple across the body politic,' said pollster Bill McInturff."

"This year could mark the emergence of what might be called mortgage moms, voters whose sense of well-being is freighted with anxiety about their families' financial squeeze. Among the most exposed are those who bought into one of the great fads in mortgage lending in recent years, adjustable rates. Next year, $1 trillion worth of adjustable-rate mortgages is scheduled to readjust to a higher interest rate for the first time."

"The political implications of these trends are obvious. 'A large number of voters have a definite foreboding about the economy, and that isn't good news for incumbents,' said Gregory S. Casey, CEO for a nonpartisan electoral analysis organization. 'They feel disappointed in government institutions that they think have let them down.'"

From MSN Real Estate. "Those easy-mortgage chickens are coming home to roost. For many Americans, this is scary news, if hardly unexpected. Everyone who took out an ARM or another equally appealing low-rate mortgage over the past few years to buy a house, at times beyond their means, knew that someday their payments could balloon."

"Those home buyers may have thought they would be able to flip their houses quickly and avoid the rise in their mortgage payments. But now, many of them are finding themselves stuck in a house they may soon no longer be able to afford, and, as the real estate market peters out, there's little they can do about it."

From Bloomberg. "The news isn't all bad if you are looking to buy in this market. Between builders eager to discount and homeowners needing to sell, there may be as many as 4.7 million homes for sale now, according to Friedman, Billings, Ramsey Group."

"'Since homebuilders have financial incentives to sell new houses in inventory promptly, we expect them to aggressively offer incentives and discounts to homebuyers,' writes Michael Youngblood, Friedman's managing director of asset-backed securities research. 'Given the average industry profit margin of 25 percent, they have ample latitude to do so.'"

"While buyers will see some heavy discounting if the current slump is prolonged, sellers should beware. More foreclosures put more homes on the market and sink prices further."