This is a partial transcript from Your World with Neil Cavuto, June 10, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: Wall Street keeping a very close eye on the management shakeup at Freddie Mac and with good reason. Did you know that one in every six mortgages in this country is financed through Freddie Mac?  And now its scandal could be very well the issue that could pop this housing bubble. You’ve heard other excuses thrown at it. Why not this one?

Joining me now to talk about it, Donald Straszheim, the president of Straszheim Global Advisers, and a man right in the center of all of this whose stock was up better than three smackers today, Ara Hovnanian, CEO of luxury homebuilder Hovnanian Enterprises.

Ara, on that issue of Freddie Mac, people said that’s the issue that’s going to derail you, is it?

ARA HOVNANIAN, HOVNANIAN ENTERPRISES CEO: Not at all. We’re not concerned. I mean everybody is looking for some issue that’s going to derail the housing market. The fact is demographics are really the underlying issue. Demographics look great. I’m not concerned at all.

CAVUTO: Donald Straszheim, you’re out in a pretty neck -- expensive neck of the woods. What do you see?

DONALD STRASZHEIM, STRASZHEIM GLOBAL ADVISERS: Neil, I think pretty much I agree with what Ara said. The housing market looks terrific. What will stop housing is a stronger economy, which will drive up mortgage rates.

But, until that occurs, I think this Freddie Mac furor is something that is a passing event, and I would say that, in three years, you’ll be calling up guys like me or Ara and you’ll be saying now -- now what year was that little flap at Freddie Mac because you won’t even be able to find it in the data.

CAVUTO: All right. Now, obviously, the Street seized on the Freddie Mac news yesterday, that there might be a scandal afoot, that it could have wider implications for your industry and beyond, and then just the opposite today. Freddie Mac inched back a little bit. Your stock soared a lot today. Which is the real world?

HOVNANIAN: Well, you know, I think the reality is, right now, we feel comfortable in the long-term scenario. I mean, if interest rates were to go up, which they’re not likely to do right now, it’s only going to be because job growth is positive, because consumer confidence is good, and the economy’s doing better. Even with a little higher interest rate, we’d take that tradeoff any day.

CAVUTO: All right. Donald Straszheim, he says he can withstand a little higher interest rates. Can the industry?

STRASZHEIM: I think it definitely can withstand a little bit higher interest rates, but what worries me longer term -- and I’m very much a short-run bull on the economy and on the housing sector.

What worries me several years down the road is materially higher mortgage rates will mean that those monthly payments that all of us have gotten used to at low -- at these very low mortgage rates are going to get a lot steeper.

That will slow the housing sector but not in the short run.

CAVUTO: Don -- or, Ara, one issue that comes up is that the double- digit advances you’ve been seeing year in and year out in so many hot markets, markets that you’re strong in, the Northeast, out west, that can’t continue. What’s a more realistic growth scenario?

HOVNANIAN: Well, I mean the reality is, in terms of pricing, we forecast zero house price appreciation, and we buy all our land based on zero price appreciation. So any appreciation we have is just additional icing on the cake, and, frankly, it’s part of the reason why we’ve growing at 50 percent a year.

CAVUTO: Even though Wall Street pooh-poohs your multiples, it keeps you down there.

HOVNANIAN: Absolutely. There’s a lot of opportunity even without these raising housing prices right now.

CAVUTO: Don, as a housing group, are they resigned to this low- multiple environment where they’re not -- Wall Street’s not going to richly reward them?

STRASZHEIM: Well, you know, it’s striking, Neil. If you look at the housing -- the biggest 10 housing builders, of which Hovnanian is, of course, one of them, over the last 12 or 15 years, compared to the rest of the economy, it looks like a growth stock, that whole...

CAVUTO: All right.

STRASZHEIM: ... that whole sector, clearly growth sector, so it seems to me they ought to be getting higher multiples because housing is not as volatile as it used to be because of the interest rate factor and the secondary mortgages that we see out of Freddie Mac, Fannie Mae, and so forth.

CAVUTO: All right. Don, thank you very much. Ara, thank you very much.

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