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The homebuilding industry is expected to make gains in 1998, although changes in interest rates may influence consumers' decisions about building. After trading lower than average for the first half of 1997, homebuilding stocks are rising. Shares of Centex, for instance, gained about 35% in the third quarter. Many builders are spinning off their financial services subsidiaries.

Home construction industry securities will be an average investment area for 1997 and beyond but sharp short-term fluctuations can be expected in keeping with the country's economic trends. Performance in 1996 was strong, aided by the Federal Reserve's decision not to increase short-term rates and its sending home mortgage rates under 8%. Employment, and its resultant effect on home purchases, will greatly influence industrial growth.

The homebuilding industry is expected to slow down because of increased interest rates, but investments in the industry should be profitable over a number of years. The number of unsold homes is expected to rise, after growing to a 6.4-month supply by Jan 1995. Companies such as Centex Construction Co will probably report a 10% drop in homebuilding orders for the 1st qtr 1995.