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Consumer behavior in America appears headed toward a new normal that includes less household debt, more saving, and cooler expectations about home prices in the future.

The latest sign of this transition came Monday, when the US Commerce Department reported that consumer spending fell in December for a record sixth straight month, and the savings rate rose.

While personal income fell 0.2 percent for the month, spending fell even further – a full percentage point.

Much of what’s happening is a short-term reaction to tough times as the risk of unemployment has risen. But economists say it also reflects a longer-term transition in response to the end of an era of soaring home prices.

Over the past few months, consumers have staged their largest pullback in spending since the recession of 1974 – even though falling energy prices have effectively put more cash in their pockets. But those gas-pump savings still represent a boost for households, which could help set the stage for consumer spending to begin to revive later this year.

“It’s helping to repair the balance sheet, which is all to the good. It creates a stronger potential for consumer spending down the road,” says Ken Mayland, president of ClearView Economics near Cleveland. “We are going to see a new consumer emerge from this rubble.”

Consumer spending to rebound?

Forecasts these days come with a large degree of uncertainty, but most economists see consumer spending resuming an upward trend later this year, according to a January survey by Blue Chip Economic Indicators. Most say that the worst of the recession will soon be in the rearview mirror.

For now, though, the economy is feeling the shock as consumers transition from old behaviors to new ones.

For much of this decade, many Americans lived beyond the means of their regular income, tapping cheap credit and the rising value of their homes for extra cash. For a time, the savings rate fell to zero.

Now Mr. Mayland figures that cooler demand for credit “will persist for a good long while,” and the savings rate will rise. He doesn’t expect it will match the levels of 8 to 10 percent of disposable income that were common before the 1990s, but in December Americans saved 3.6 percent of their income.

Beth Byrne is one face of the new economy of 2009.

With interest rates now historically low, the Boston-area resident was recently able to refinance the mortgage on the home where she’s raising her two children. But she figures the wise thing is not to spend much, if any, of the roughly $200 a month that stays in her bank account as a result.

“I don’t think it’s going to go toward buying new things,” she says.

She’s not the only one thinking that way. In the final quarter of 2008, the savings rate reached its highest level since 2002, according to numbers the Commerce Department released Friday. As Americans held onto more of their income, consumer spending fell at a 3.5 percent annual pace, accounting for much of a 3.8 percent annualized dive in gross domestic product (GDP).

The shift appears tied to expectations that the economy won’t return to roaring growth in the near term. In a late-January Diageo/Hotline poll, 43 percent of Americans said they expect it will take two to four years “before the economy comes out of recession and is back on track.” Among the other respondents, as many said it will take even longer than that as said the time will be shorter.

President Obama has expressed the same view, even as he is trying to take steps that will revive consumer confidence from its current lows. In a radio address Saturday, he said economic recovery will take “years, not months.”

The nation’s two most recent recessions, in 2001 and 1990-91, were relatively short but were followed by so-called jobless recoveries, in which it took several years before the economy started humming.

This time around, the same concern is at play, magnified by several forces affecting consumers:

•An unusually large slide in home prices has reversed a “wealth effect,” where households spend more when they feel their net worth is rising.

•Many consumers are postponing purchases, figuring that a house or a flat-screen TV may be cheaper three months from now.

•Even many workers who aren’t losing jobs face pay cuts or reduced hours of work.

•Credit conditions have become tighter and consumers are less interested in piling on debt. The level of household debt as a percentage of GDP has doubled since 1980, but now some forecasters expect it to decline for the first time in generations.

What makes people spend

What might get consumer spending to rise again?

A stimulus plan in Congress is expected to include tax cuts that will show up on pay stubs quickly. That can fill some of the hole in consumer spending, which should, in turn, help reduce the decline in jobs.
Borrowers who can get a mortgage refinance will reap extra cash – and spend at least some of the savings.

Another key is investor sentiment. If the stimulus or bank-recovery policies cause investors to anticipate the recession’s end, the result could be a rising stock market that boosts consumer confidence.

Similarly, any progress in ending home-price declines and the related problem of foreclosures could have powerful effects on confidence.

“Just give everybody a tax credit who buys a house,” suggests Michael Cosgrove of the University of Dallas, who publishes forecasts in the EconoClast newsletter. With interest rates low, a $10,000 credit that’s available only during this year might spur more people to buy. Something similar could be done for automobiles, which alone accounted for a big chunk of the recent drop in consumer spending.

Businesses are trying their own ways to overcome consumer fears. The Korean automaker Hyundai says it is drawing interest with its latest buyer enticement, which was advertised during the Super Bowl. The carmaker offers an “assurance” program, so that buyers who finance their purchase of a new car can return the car, and get their money back, if they lose their job.

Home affordability improves

Homes are now very affordable in general, according to an index that pulls together data on average incomes, home prices, and mortgages costs. But the foreclosure wave means a glut of unsold homes still hangs on the market.

Ms. Byrne, who works as a real estate agent in Natick, Mass., says potential buyers are out there, just waiting for the right catalyst to make a bid.

“I’m hoping with the new administration and the work they’re doing to recover the economy, that things will stabilize,” she says.

It may take a while for the economy to rebuild momentum. But as a bottom is reached and fear recedes, the tendency of consumers to spend will revive.

The pace may be moderate, but Mayland in Ohio expects that consumer spending will be rising again later this year.

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