This week, Realty Times puts its focus on consumers. Recent reports say that consumers are both wary and weary and a pullback in consumer spending could pull the plug on economic growth, throwing the nation into a mild recession. What will homebuyers do now that the summer homehunting season and back-to-school rush is over?

As we head into the holidays, economists are looking closely at inflation. The Federal Reserve has just raised short-term interest rates for the 12th time in a row which suggests that inflation is still with us. While the Fed tries to control inflation while encouraging growth by keeping interest rates at approximately 2.75 percentage points ahead of the rate of inflation, that's not always to do in tandem.

The consumer price index is rising at a rate of 4.7 percent, including volatile and rapidly rising food and energy costs. If analysts are correct, the Fed should raise rates three more times before Fed Chief Alan Greenspan retires at the end of January until the Fed fund rate reaches 7 percent.

During the late 1980s, the last time the Fed was this aggessive in raising rates, the country went into a mild recession by 1990, but that uncomfortable period was followed by the longest inflation-free period and the largest peacetime economic expansion in U.S. history.

What does all this mean to homebuyers and sellers? Now that deals on year-end automobiles are over, and prices on goods and services are up, reflecting higher energy costs for retailers, consumers are pulling back on their spending. September and August marked the first back-to-back declines in spending in 15 years, with little sign of change for the holiday season. In addition, they are spending more than they earn, which means that they are putting more on credit, or or negative savings. Core prices for goods are up 2 percent. That should slow fourth-quarter growth in the economy.

Mortgage interest rates, while not tied directly to Federal fund rate increases, eventually respond to the higher costs of short-term loans to banks. Also taking the fun out of the party are rising fears that the Bush administration will seriously consider eliminating current homeowner benefits such as the mortgage interest rate deduction. So, until there is a little more guidance about what the administration will do and when, homebuyers have good reason to sit on the sidelines.

That doesn't mean they want to stop buying homes, however, and the dip in oil prices is also bringing customers back into the stores. Realty Times believes homebuyers will try to force sellers to negotiate their prices down from record highs and that could take some time as both buyers and sellers adjust to new market realities. For the time being, homes are still excellent places to park cash, especially for the long term.