ONCE UPON A TIME…as in just last week, Mortgage Bonds reacted to a story pulled straight from the pages of Mother Goose. Remember Goldilocks and the Three Bears? Goldi comments on the three bowls of porridge she finds – “ One is too hot, one is too cold, and the third one is just right.” Last Friday, Traders were thinking about the same thing as the highly anticipated January Jobs Report made its debut. The Fed had a few key changes from previous statements, all implying positive feelings about the US economic recovery.

Not too hot. The Labor Department reported 112,000 new jobs were created in January. This was a sharp rise from December’s reading of 16,000, originally having been reported at an anemic 1,000! But with market expectations hovering near 165,000 job creations, this news release was still a disappointment, yet brought a sigh of relief to Bond Traders. The news also pushed the likelihood of a Fed rate hike further into the future.

Not too cold. The unemployment rate improved to 5.6%, down from the previous 5.7%, slightly ahead of expectations. Improving unemployment rates are generally bad news for bonds, but some economist’s attribute the fall in unemployment to growing numbers of “discouraged workers” – those who have dropped out of the labor force because they've been unable to find jobs.

Overall, both stock and bond traders seemed to consider the Jobs Report "just right”, following the release of these not-too-hot and not-too-cold numbers. With traders focusing mostly on payroll growth, too few jobs created would have raised concerns of fading consumer demand, while too many jobs would raise fears of higher interest rates. The synopsis? The employment report numbers were not strong enough to prompt the Fed to pull the trigger on an interest rate hike sooner than expected, yet the numbers are much better than last month and good enough to show the job market is recovering. For the week, mortgage interest rates improved about .125%.

THIS IS NO FAIRY TALE…ACCORDING TO THE NATIONAL TAXPAYERS UNION, 60% OF PROPERTY IS OVERTAXED, YET FEW DO ANYTHING ABOUT IT. LEARN WHAT TO LOOK FOR AND HOW TO DETERMINE IF YOU MIGHT BE ENTITLED TO A LOWER PROPERTY TAX BILL, IN THIS WEEKS MORTGAGE MARKET VIEW.

So how does the next chapter read? Knowing that the Jobs Report can influence the direction of Mortgage Bonds for days and even weeks, and as seen in the chart below, Bonds and therefore mortgage interest rates improved on Friday. So the million-dollar question is…are rates headed lower again? While history would tell us so, with Alan Greenspan reporting to the Senate this Wednesday and Thursday, anything can happen. Mr. Greenspan will need to be a smooth talker and do a little tightrope walking. He won’t want to shatter the bond market by showing too much enthusiasm on the economy, but on the other hand, he simply can’t avoid the unfolding economic recovery and growth story. You can be sure bond traders will be on the edge of their seats. They won’t want to see a repeat performance of last Thursday when Fed President Bernanke sent the bond market lower in a hurry after making some positive comments on the economy and job growth. Mortgage interest rates should stay fairly stable to slightly improving, assuming Mr. Greenspan isn’t too enthusiastic to the Senate this week.

According to the National Taxpayers Union, an estimated 60% of property is being overtaxed. Many consumers have seen tremendous increases in their property values over the last several years, and while this appreciation is a wonderful gain to their net worth, the resulting property tax hikes are not quite as welcome. Why do so few people fight “City Hall” on this? It’s usually just a lack of knowing what to look for, and how to make the appeal. But why not at least take a look? After all, it’s the only part of your tax bill that you can appeal, and if you don’t evaluate your assessment, you may end up paying too much for years to come. Doing a small amount of research may very well result in a sizable tax savings, so here are some simple steps that can be taken to determine if you are paying too much on your property tax bill.

First, a little homework. Call the property assessor’s office or search online to determine when property values are assessed in your area, and request a copy of your current assessment. Remember that the “assessment” is different from an “appraisal” that may have been done in relation to a home purchase or refinance. While you are at it, go ahead and find out what forms may be required to make an appeal and any deadlines that might exist.

Next, check for obvious errors in the assessment. Does it list 3 bathrooms when there are only 2? Does it include an unheated garage or screened in porch as living area? Are the dimensions of both the home and the lot correct? These mistakes can be costly.

Now do a little snooping – it’s legal! Call a Realtor and request a list of all sales within the past six months in your neighborhood. Select a few homes that are similar to yours, and identify the differences between their homes and yours. Assessed values are public information, so visit a site such as www.domania.com to compare, or request the information from the assessor’s office.

Swallow your pride, and determine what might make your home worth less than theirs. Are you close to a noisy road, or does your home have other “warts” such as foundation cracks or a sagging roof? Photo document all the bits and pieces you can find that might make your home lower in value.

Now go for it. After doing this research, you will probably have enough information to determine if an appeal is warranted. The procedures for appealing vary – in some areas, you may be able to request an informal meeting with the assessor, but in other areas, a formal hearing is required. In either situation, you will need to prepare a convincing case as to why you believe your property tax assessment is incorrect. Provide a clear presentation of the facts along with supporting documents such as photos, appraisals and any other documentation you have collected. But keep your cool - angry accusations generally won’t serve any good purpose. Remember that your goal is not to make the assessor look bad, but rather to show the facts that support your view that the assessment should be amended.

This week's economic news calendar has a dash of relevant data, headlined by Retail Sales and Initial Jobless claims on Thursday. And don’t forget the two-day Fun Fest beginning at 10:00 ET on Wednesday, featuring Fed Chairman Greenspan presenting his Monetary Policy Report before the House and Senate. You can be assured traders and bond dealers will be attentively listening for any of the Chairman’s statements that will potentially spook the financial markets.

Remember, as a general rule, weaker than expected economic data would indicate the economy is not improving as quickly as expected, and could cause mortgage rates to improve. Positive data would indicate a strengthening economic climate, and could cause mortgage rates to gradually climb higher.

For the week of February 9 – February 13, 2004