Transcripts

The Dow Continues Its Record Run Despite A Housing Slump

SUSIE GHARIB: The Dow rose today to its fourth record this week and its 18th new high since October 3. The blue chip average added 36 points to 12,342. The gains came even though new home construction fell to its lowest level in six years. Stephanie Dhue takes a look at whether the slowing housing market is close to bottoming out.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Washington, DC area homebuilder Basheer and Edgemore is still building new projects. The builder specializes in luxury homes and has weathered the market downturn by redesigning houses to lower their prices. Diane Cox Basheer predicts the real estate slowdown is near the bottom.

DIANE COX BASHEER, PRINCIPAL, BASHEER & EDGEMORE: I think we are going through the bottom, and we're hearing very good stories of people finally being excited about their housing opportunities.

DHUE: But there are signs nationwide that housing will continue to decline. Housing starts in October fell 14.6 percent from September's pace and are now 27 percent lower than a year ago. Building permits are also sliding. October permits dropped more than 6 percent to an annual rate of 1.5 million. That's the ninth straight decline and the lowest rate since December of 1997. Economists say the housing slowdown will continue to weaken economic growth.

CHRIS VARVARES, PRESIDENT, MACROECONOMIC ADVISORS: It's a drag right now. It's part of the process by which the economy is slowing from above-trend growth to slightly below-trend growth. It's what the Fed wanted. It's what the Fed seems to be getting and so far, so good, as long as the housing starts just don't remain in a freefall.

DHUE: Most economists don't expect a freefall in housing, but do expect more downside.

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: We're approaching the bottom, but I think we're a good three to six months away. In terms of sales, I think we're close, the next few months. In terms of construction, it won't be until the spring or summer.

DHUE: Once the market does bottom out, experts predict it will stabilize to a more normal pace, which won't feel anything like the last real estate frenzy. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Fairfax, Virginia.