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

Economy has good August but slowdown said likely
Nov 1, 2006 01:00 | Toronto Star
dragged down by a weakening U.S. economy. "With the U.S. economy continuing ..... of the Canadian economy continue to take a hit, while the domestic economy surges ..... , you look for the Canadian economy to operate below its potential
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. consumer spending edges up
JEANNINE AVERSA
Oct 30, 2006 17:53 | thestar.com

July-to-September quarter as a whole, the economy grew at a feeble ..... pressures in the months ahead. With the economy slowing and energy prices
read more

This Week's Highlights

• US Growth Slows Further in Q3 on Weakeness in Housing
• US New Home Sales Stronger than Expected in September, But Prices Plunge

New home sales in September were stronger than expected increasing 5.3% from August to 1,075,000 units, annualized. However, sales are still down 14.2% from September 2005. Spurring demand in September was a drop in median sales prices of 9.3% from August and 9.7% from a year ago, the biggest decline in yearly prices since December 1970. The median price of a new home now stands at $217,100.

Meanwhile, existing home sales decreased 1.9% from August and 14.2% from September 2005. Existing home sales have fallen for the last six months. The decline in demand caused the median price of an existing single-family home to drop for a second consecutive month, and it is down 2.5% from September 2005. This is the largest yearly decline on record back to 1969. Regionally the price drops were broadly based with the largest decline (-6.7%) in the Northeast.

GDP growth in Q3 slowed to a weaker-than-expected 1.6%, at an annual rate. This increase represented a notable moderation from gains of 2.6% and 5.6% in the second and first quarters, respectively. This slowing trend is largely attributable to sizeable declines in residential investment with activity dropping an annualized 17.4% in Q3 following an 11.1% plunge in Q2. The rise in mortgage rates is contributing to the housing market correcting from earlier very high levels of activity. A stronger-than-expected increase in imports, up 7.8%, also contributed to the slowing as imports enter with a negative sign into the GDP add up. However, a surge in imports does imply strength in demand by US households and businesses. Foreign demand for US products remained solid with exports rising 6.5% in the quarter. However, the even larger gain in imports resulted in net exports deteriorating in the quarter. As always, we will keep our ear to the ground and make you aware of developments as they occur.