Weekly Update

Last Week in Review

"I MISSED IT BY THAT MUCH!" Don Adams on the TV show "Get Smart"...And just like good old Maxwell Smart always explained his big goofs with this classic phrase - you have to wonder if the Department of Labor was thinking the same last Friday when the Jobs Report hit the wires.

The headline number of new jobs created in the US economy for September was reported at 51,000 - a miss from official expectations of 120,000, but very near where the market at large was anticipating. But then came the real "goof" - the previous month's number of jobs created was revised upward by 60,000 jobs! That's quite a big miss, adding more jobs by revision than September was reporting in total. Normally a weak jobs number would cause Bond prices to worsen and home loan rates to improve, but the surprise upward revision caught the market off guard. Home loan rates inched very slightly higher on Friday, yet overall ended the week very close to where they began.

A further surprise came in the form of a downward tick in the unemployment rate, moving from 4.7% last month now to 4.6%, indicating that the US still has a healthy job market on the whole. And although the housing market has cooled as expected - strong job markets lead to healthy housing markets.

ONE THING YOU MAY NOT WANT TO MISS IS THE YEAR-END DEALS YOU CAN GET ON NEW VEHICLES, AS DEALERS CLEAN OUT THE OLD INVENTORY AND MAKE WAY FOR NEW. BUT IF YOU DO WANT TO MISS SOME OF THE RUNAROUND OFTEN ENCOUNTERED DURING THE BUYING PROCESS, READ THIS WEEK'S MORTGAGE MARKET VIEW.

Forecast for the Week

So after the Jobs Report, how does the economic news lineup look for this week? A few noteworthy items are on deck, including the highly anticipated Fed Minutes from the September 20th meeting. Why all the excitement around the Minutes being released on Wednesday? Last month, Richmond Fed President Lacker was again a dissenter on the vote to pause in the rate hike cycle - he actually felt there was still enough inflation in the economy to warrant another hike. So the Minutes will be dissected for clues, wondering why Lacker isn't on board with the rest of the team. The recent reports seem to indicate that the economy is cooling and inflation is controlled - which is the Fed's biggest concern - and the Minutes will give some inside scoop as to what the Fed members all have on their minds.

A look at the chart below shows Bond prices remain on a clear uptrend, meaning home loan rates have improved over the recent months. Could rates continue to get better, or are they ripe for a reversal? The present technical support just underfoot Bond prices has helped them hold their improvements - but news that stinks of inflation could cause them to step off the Up Escalator, with home loan rates worsening. But if the floor of support can hold throughout the news of the week ahead - home loan rates should continue to improve overall. In observance of the Columbus Day holiday, the markets will be closed on Monday, reopening for action bright and early on Tuesday.

Chart: Fannie Mae 6.0% Mortgage Bond (Friday Oct 06, 2006)

The Mortgage Market View...

OH WHAT A FEELING...a new car can bring! It's that time of year, when dealers are blowing out the 2006 models to make room for the 2007's. The discounts are great, financing is exceptional, and you may even get to skip a payment or two. But before you run out for a test drive and fall in love with that new car smell - be sure to do a little homework and be aware of a few items that could have you paying more than you anticipated for that new car.

Before you even start negotiating the price of the car, ask the salesperson if the dealership requires that you sign either a "Dispute Agreement" or "Conflict Resolution" agreement. Sounds innocent enough, but here's the deal. By signing the form you are agreeing that if a problem arises, the problem will be settled through arbitration...where the auto dealer chooses the arbiter, you pay all the fees, prohibits you from appealing the decision - but the dealership can appeal, and it also excludes you from participating in any class action lawsuits against the dealer. Whoa. So if the salesperson says that this form is a requirement, think twice - as dealerships that require these forms may possibly not be reputable ones, and may potentially face frequent lawsuits.

When reviewing the pricing and list of fees associated with the purchase, be on the lookout for "environmental fees" or "advertising fees". These costs are often just a way for the dealer to make a few extra bucks at your expense, so be aware of that when negotiating price. Additionally, "protection packages" are generally not worth the cost. If you are super concerned about protecting the interior or exterior of your car from weather or sticky fingers - you are generally much better off getting that done on your own.

When you arrive at the financing table, take your time signing. Most people want to get it over with quick and race away, testing out the zero to sixty MPH performance, leaving a few skid marks in their wake...but those skids could be super costly if you speed too quickly through the financing process.

Review all the documentation with care - and ask in particular if your financing is approved prior to taking delivery on the vehicle. If you have signed a "Writ of Rescission" as part of your financing paperwork and take delivery on the car without your financing approved - you have just agreed to take a higher financing rate and higher payments, if you are not approved under the terms you were quoted. One way to avoid this situation altogether would be to obtain financing through a credit union or bank prior to going to the dealership. You may end up with a better rate, and not have to worry about unethical financing practices.

For more tips and details about the process of buying a car, visit www.autoissues.org, or purchase and read "Don't Get Taken Every Time: The Ultimate Guide to Buying or Leasing a Car in the Showroom or on the Internet" by Remar "Bubba" Sutton. Doing your homework will save you time and money - and best of all, will have you driving off the lot knowing that you got the best deal possible for your new car!

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of October 09 – October 13
Date ET Economic Report For Estimate Actual Prior Impact
Wed. October 11 10:30 Crude Inventories 10/07 NA 3355K Moderate
Wed. October 11 02:00 FOMC Minutes 9/20 HIGH
Thu. October 12 08:30 Jobless Claims (Initial) 10/07 NA NA Moderate
Thu. October 12 08:30 Balance of Trade Aug -$66.5B -$68.0B Moderate
Thu. October 12 02:00 Beige Book Moderate
Fri. October 13 08:30 Retail Sales Sept 0.2% 0.2% HIGH
Fri. October 13 08:30 Retail Sales ex-auto Sept 0.0% 0.2% HIGH
Fri. October 13 09:45 Consumer Sentiment Index (UoM) Oct 86.0 85.4 Moderate