Home sales leave spending in the dust

By Barbara Hagenbaugh
USA Today

WASHINGTON — Americans snatched up homes at a dizzying pace in April, but their incomes and spending barely rose, according to reports released yesterday that suggest the economic recovery is on track but is not moving at the swift pace some had hoped.

The housing sector, however, continued to be the exception. Sales of previously owned homes jumped 7 percent to 5.79 million units on a seasonally adjusted annual basis in April, the National Association of Realtors said. That's the third-highest sales level on record.

Incomes, however, nudg-ed just 0.3 percent higher in April, while consumer spending rose a disappointing 0.2 percent — adjusted for inflation — after being flat in March, the Commerce Department reported.

Economists say that suggests consumer spending is rising at about a 2.5 percent annual rate this quarter after increasing 3.2 percent in the first quarter and 6.1 percent in the last three months of 2001. Many analysts, who closely watch consumer spending because it accounts for two-thirds of U.S. economic activity, said yesterday they might lower their second-quarter gross-domestic-product forecast following the spending data.

"The numbers for April suggest a little softening," Credit Suisse First Boston economist Jay Feldman says. "It's probably just some loss of momentum after an unsustainably strong fourth and first quarters."

Analysts say any worries are unnecessary. Consumer spending is still growing at a healthy, albeit slower, pace that will boost the economy, they say.

Economists say the strong housing market also bodes well for future consumer spending. Home buyers typically buy new appliances, furniture and other goods to spruce up their new homes.

The median price of homes sold in April was $153,300, up 7.1 percent from a year earlier.