This week's mortgage market update contains:

• Housing starts take an unexpected fall
• Mortgage rates have further to fall
• U.S. retail sales rise

This week's highlights:

• Canadian Housing Starts Moderate in September
• US Payroll Employment for September Shows a Modest Gain

This week's Quote:

Set up as an ideal the facing of reality as honestly and as cheerfully as possible. - Dr. Karl Menninger

Weekly Articles of Interest

Housing starts take an unexpected fall
RITA TRICHUR
Oct 11, 2006 01:00 | Toronto Star
market, the Canada Mortgage and Housing Corp. report says. "Certainly ..... , and relatively tame mortgage rates. "At the same time, we're getting
read more

Mortgage rates have further to fall
JAMES DAW
Oct 10, 2006 07:00 | Toronto Star
Mortgage interest rates have fallen from the peak they hit ..... to come. Even without further reductions, a leading mortgage brokerage ..... the next several months. If bond yields fall, then mortgage interest
read more

U.S. retail sales rise
Oct 9, 2006 12:38 | thestar.com
Mortgage interest rates have fallen from the peak they hit ..... to come. Even without further reductions, a leading mortgage brokerage ..... the next several months. If bond yields fall, then mortgage interest
read more

This Week's Highlights

• Canadian Housing Starts Moderate in September
• US Payroll Employment for September Shows a Modest Gain

Payroll employment in September showed a smaller-than-expected gain of 51,000 in the month. However, there were a number of other aspects in the report that tempered the impression of weakening labour markets. The modest gain in payroll employment in September was paired with the workweek in the month remaining unchanged at 33.8 hours. Thus the index of weekly hours, which reflects the combined effect of both employment and hours worked, was relatively steady at 105.0 compared to 105.1 in August. For the third quarter as a whole, this measure is only up an annualized 0.9% and down from an average increase over the first half of the year of 2.8%. Assuming some modest gain in productivity, the employment report confirms that the economy continues to expand, though the growth rate may be slowing to slightly below potential from an above-potential rate in earlier quarters.

Canadian housing starts moderated in September at 211,300 units annualized, the lowest level this year. Starts were down 2.4% from a revised 216,600 units in August and 7.6% from September 2005. Starts were lower than expected, but still remained at a healthy level. The decline was due to the volatile multiples component dropping 7.0% from August. At the same time, singles increased for the fourth consecutive month with a gain of 0.8% in September, suggesting some underlying strength in the housing market. On a regional basis, starts in urban areas decreased 10.8% in Quebec, and 4.3% in Ontario, while increasing 0.8% in Alberta in September from August. Housing starts in the third quarter were down 11.9% annualized from the second quarter. This is lower than our estimate that residential construction fell 7.0% in the third quarter; however it still supports our expectation that the housing market will ease gradually. A cooling in residential construction will moderate economic growth until the second half of 2007. As always, we will keep our ear to the ground and make you aware of developments as they occur.