Transcripts

The Housing Industry Hits A Hot Streak

SUSIE GHARIB: The nation`s builders broke ground on a record number of homes last month. The Commerce Department says new housing starts rose a whopping 14 1/2 percent in January, the biggest number of starts in nearly 33 years. But as Stephanie Dhue reports, most observers don`t expect that to last.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The weather outside was delightful. It was the warmest January on record in the U.S. and homebuilders took advantage of it. But with new home sellers now giving incentives to buyers, economists don`t expect the building boom to last.

DAVID SEIDERS, ECONOMIST, NATIONAL ASSOCIATION OF HOME BUILDERS: This ain`t the time for -- to go into a building surge. So I really do think this is temporary, just a timing thing, and I think going forward the rest of 2006, we`re probably looking at a somewhat systematic cooling down of the market.

DHUE: Apparently, not right away. Permits for future construction were also higher than expected in January. There are some factors that may explain why home construction has stayed unusually strong. One is greater demand for second homes. Another is a need to replace older homes.

RICHARD GREEN, REAL ESTATE, GEORGE WASHINGTON UNIVERSITY: We have a lot of very old housing stock that was built in the 1920s, that was built in central cities that are losing population, particularly in the upper Midwest and the northeast. And so they become vacant, but they really not part of the market anymore.

DHUE: Some economists see homebuilding, along with humming factories and steady shoppers as a sign of the economy`s strength.

MICKEY LEVY, ECONOMIST, BANK OF AMERICA: . has very healthy momentum as we begin 2006, so any earlier concerns that the economy was going to significantly falter have dissipated. The economy looks strong.

DHUE: Still, economists warn not to read too much into any one number. Instead a snapshot over three to six months will give a more telling picture of what`s really going on in the market. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.