- The Washington Times - Thursday, December 24, 2009

Americans are starting to spend a bit more money, but not enough to power a strong economic recovery.

Consumer spending posted its second straight monthly increase in November, rising 0.5 percent, the government said Wednesday. But new homes clearly weren’t on the shopping list. New-home sales plunged unexpectedly to the lowest level since April.

The reports were evidence that the recovery from a deep recession is proceeding in fits and starts, with households struggling in a bleak job market. At the same time, economists said the economy was much improved from this time last year, when the nation was gripped by the financial crisis.

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“People are continuing to pay down their debts, and they remain concerned about their financial futures and whether they will have jobs,” said Sal Guatieri, an economist at BMO Capital Markets. “Santa’s toy bag won’t exactly be brimming with goodies this year, but at least he will show up, unlike last year.”

Americans’ income, meanwhile, ticked up at the fastest rate in six months last month, though the 0.4 percent increase was less than economists expected. That reflected a $16.1 billion increase in wages and salaries, helped by last month’s drop in unemployment.

But consumers are still worried about job security, and that weighs on decisions about big purchases such as new homes.

Treasury Secretary Timothy F. Geithner said he thinks it’s reasonable to expect “positive job growth” by spring and that people should have confidence about an improving economic climate.

“I think most people would say the economy actually is strengthening now going into the end of the year,” but the key is to regain lost jobs, Mr. Geithner said Wednesday in an interview broadcast on ABC’s “Good Morning America.”

The 11 percent slump in new-home sales from October’s pace shows that consumers are taking their time after an extension of a deadline for first-time buyers to qualify for a tax credit. The incentive, worth up to $8,000, was set to expire at the end of November. But Congress pushed back the date to April 30 and expanded the program to include current homeowners who move.

The only strong region was the Midwest, where sales rose 21 percent. Sales fell by 21 percent in the South, 9 percent in the West and 3 percent in the Northeast.

And buyers are putting their dreams of palatial McMansions aside. Vince Napolitano, president of Napolitano Homes in Virginia Beach is hoping to sell 110 houses next year, up from fewer than 70 this year, by focusing on smaller homes that sell for $400,000 or less.

“Those who are out there looking are buying something that they truly can afford,” he said. “They’re having to settle for smaller homes.”

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