Nightly Business Report.

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Original Source: NIGHTLY BUSINESS REPORT

PAUL KANGAS, NIGHTLY BUSINESS REPORT ANCHOR: Investors go on a late day buying binge, sending the Dow up almost 130 points -- most of it in just the last hour of trading. Spurring the rally: some higher earnings and some lower oil prices.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: The housing industry hits a home run in September, still going strong despite hurricanes and higher interest rates. Housing starts are at their highest level in seven months, but experts say don`t expect them to stay here.

KANGAS: Investors trade in as well as on the Chicago Board of Trade today as the exchange goes public. It racks up a stellar first day with a gain of almost 50 percent.

GHARIB: Then, Bill and Melinda Gates are known for their foundation`s charitable works, but they`re not alone. They`re just two of millions of Americans who put their money to good use in helping others.

KANGAS: I`m Paul Kangas.

GHARIB: And I`m Susie Gharib. This is NIGHTLY BUSINESS REPORT for Wednesday, October 19.

Good evening, everyone. The housing market is still going strong. The Commerce Department reported today that construction of new homes surged 3.4 percent in September to the highest level in seven months. Analysts had expected the pace to slow because of hurricanes Rita and Katrina and rising mortgage rates. Darren Gersh has details.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Remember all that talk a month or so ago that maybe, just maybe housing might be cooling off a bit? Forget about it.

DAVID WYSS, CHIEF ECONOMIST, STANDARD & POOR`S: Housing just keeps going. We can`t stop it with a wooden stake through the heart and the Fed is trying, believe me.

GERSH: The Commerce Department says housing starts rose 3.4 percent in September and permits, an indicator of future activity, were up 2.4 percent. Not only that, weekly mortgage applications were up 6 percent this week and builder sentiment is bullish.

DAVID SEIDERS, CHIEF ECONOMIST, NATIONAL ASSOCIATION OF HOME BUILDERS: The market, I think, you know, right now and looking out still looks very, very good. The question is, do we flatten and come off of it or continue to run at this high pace? I think we`re going to come down.

GERSH: There is plenty of evidence housing prices are getting out of whack in some cities. In San Diego, San Francisco, Los Angeles and Orange County, the median house price last year was more than nine times the median income. In New York, Miami, and Boston, home prices are six to eight times income. The national average home price is 3.2 times income.

WYSS: If this is the time when you`re looking at the speculative purchases, a rental property, I`d look very carefully at whether this is the right time to be buying into this market.

GERSH: Economist Mark Zandi says housing prices in many areas now are well beyond anything that can be explained by job growth, building restrictions or other traditional yardsticks. And Zandi estimates housing nationwide is 15 percent overvalued.

MARK ZANDI, CHIEF ECONOMIST, ECONOMY.COM: People start forecasting with a ruler. They have seen prices rise 10, 20 percent for the last several years, and based on that, they expect them to rise 10, 20 percent ad infinitum into the future. And when you believe that, that`s when you speculate, and that`s what we`re seeing in these markets.

GERSH: The key question is what happens when the housing market turns around. Prices could collapse as they have in Japan, but analysts say the most likely outcome is that prices will go sideways for a few years as incomes catch up to the market. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.

KANGAS: Wall Street was encouraged today by strong earnings from two of the nation`s biggest banks. Bank of America and JPMorgan Chase both saw profits rise thanks to strong trading activity among other things. Still, as Erika Miller reports, analysts are divided on the outlook...

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