Is now a bad time to buy?

http://www.theglobeandmail.com/news/national/potentially-flawed-data-used-by-banks-and-lenders-bump-up-house-prices/article4603237/

GRANT ROBERTSON and TARA PERKINS
The Globe and Mail
Published Wednesday, Oct. 10 2012, 10:28 PM EDT
Last updated Thursday, Oct. 11 2012, 6:39 PM EDT

Flaws in a national databank that helps determine the value of houses across Canada have helped fuel inflation in home prices, putting mortgage lenders and borrowers at greater risk, key players in the housing sector have warned.

Documents obtained by The Globe and Mail detailing confidential statements from banks, appraisers and mortgage insurers show rising worry over the use of a database operated by the Canada Mortgage and Housing Corporation (CMHC). The documents suggest the data are flawed and help push home prices up.

Introduced in 1996 as a way for the CMHC, banks and other lenders to quickly and inexpensively determine how much money can be lent against a residential property, the database known as Emili is relied upon too heavily by lenders, the documents suggest.

Emili is an automated system that uses figures such as recent sales of nearby homes to gauge values, without sending an actual appraiser to the address. However, the potential margin of error in calculations may pose significant problems. For home buyers, or homeowners with home-equity lines of credit, an inaccurate valuation by the database could allow them to overpay or borrow much too heavily for the home, industry members argue.

For banks, it could mean the collateral they have against the mortgage is not worth as much as believed.
“Although it provides very rapid responses, this automated approval system has significant shortcomings,” says one industry respondent in the documents, which were obtained by The Globe and Mail through access to information requests.

Because the database does not evaluate a specific property, but uses generalities to determine the risk level of a mortgage, “CMHC insured loans are often granted without truly taking into account the property’s market value,” the respondent says. “This poses a real danger of altering housing market data.”

CMHC is the largest mortgage insurer in the country. The documents, from May, were part of a process by the federal banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), to determine whether Canada’s mortgage lending rules needed to be tightened.

Though it is not possible to know who is responsible for each comment, since the names of each industry player are redacted to comply with privacy laws, numerous parties flagged concerns about the accuracy of Emili data in gauging home values. Groups who responded to the call for comments include the country’s major banks, real estate associations, representatives of the appraisal industry, mortgage insurers, and mortgage brokers.

OSFI advised banks this summer to take a closer look at how they determine housing values, and to make more effort to do more in-person appraisals. However, when those new guidelines were announced, there was no indication of the extent of the concerns raised in private by industry, and the heightened level of concern over the accuracy of Emili data.
Known as an automated value model (AVM), Emili is used to estimate whether a mortgage or a refinancing is risky or not. When financial players, including CMHC, use Emili, they submit a proposed value to the database, which then responds by saying whether the value fits within the range for that community or not. However, the database can not tell whether the actual property is worth that much.

“It allows people to pay too much for a property,” Rick Sieb, president of Intercity Appraisals Ltd. in Vancouver, said in an interview. “If the property is worth $300, and somebody comes through and the realtor has convinced him to pay $330, so he’s 10 per cent out, and they submit it through Emili or another AVM, it will just say ‘yeah, that’s fine for that area,” Mr. Sieb said. “So the lender still lends the money, the guy still buys it, and the only person hurt in the whole deal is the person who paid too much."

The Canadian housing market has been on a tear for much of the past decade but is now showing signs of petering out. During that time, consumers took on record-high levels of mortgage debt, a situation that has troubled Finance Minister Jim Flaherty, who sought to cool the housing market to prevent it from overheating any more and ultimately crashing. His goal has been to steer it towards a so-called soft landing. The latest market data suggest house sales have been falling since he tightened the rules.

During a hot housing market, a wider margin of error on estimated values was less of a concern, since there is smaller likelihood a mortgage or loan refinancing will end up under water. But if the market starts to fall, as some economists expect, the accuracy of appraisals becomes paramount. When a lender is forced to liquidate a home in the event of a default, it could incur a loss. In the case of CMHC, the federal government would be left picking up the tab.
Automated systems such as CMHC’s Emili emerged because they are a fast and inexpensive way to gauge the value of a property, instead of paying for an appraiser. When CMHC launched Emili, it said the move would move “application approval times from days to seconds.” Emili is also used by banks on mortgages where the down payment is over 20 per cent.

Asked about the documents, a spokesperson for the CMHC said in an e-mailed statement on Wednesday that the corporation uses appraisals “where appropriate.” The spokesperson added that Emili “relies on a number of different factors and models beyond home resale data” to determine risk, but did not elaborate.
The documents also suggest blunt estimates on home valuations may have resulted in higher CMHC premiums paid by consumers on insured mortgages.

I'd never heard anyone say "this one reminds me too much of a woman till you came around. No more sheep for you. Maybe a goat next time.

she said she l-l-l-l-l-l-loved me

Facts:

I have the same job that I had in the LM. I've met many folks that have made the same move that I did.

A house comparable to mine would be over 1 million down there,I paid under 300k

There are plenty of jobs…all kinds,not just trades.

Simon, you're wasting your talents and skills down there. Don't tie yorself to some shitty condo in Cloverdale just because the area is familiar to you.

there is a little less opurtuity in a town of only 5000 but there are still jobs

some people at a diner party last night were talking about how kids in their 20's have done the uni and are coming home to find jobs because its a cool little town but probbaly cuz the living is so much cheaper

And alot of those people who live on the lake in sub million dollar homes also have a ski cabin up on the hill … same thing in vancover would be $$$$$$$$$$

I was up at Bell2 on a surveying gig last week and the activity the power line is to hy 37 is crazy

Another more basic calculator

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

Nice, my house could drop 10+% per year and I'd still save $10,000. Funny how they assume
that the renter isn't paying utilities. I've never lived in a house or apartment that I
didn't pay utilities. Even with all that and if I didn't change the amount I payed in yearly
maintenance or upgrades my house could still lose 1% per year and I come out ahead.

The other problem I have with that calculator is that it assumes a 6 yr time frame. My last
house I owned I lived in it for 8 yrs. I'll probably be in this house another 5-6 yrs, so
it would have been nice to be able to change that parameter. This is also a calculator
that assumes you are getting tax credits on you personal income (USA) so I'm not sure
how that would throw off the figures for up here in Canada where you get no tax benefit
owning a house.

my utilities are included…

my utilities are included…

When I rented in Victoria, I paid all utilities and all the houses we looked at were the
same. I'm sure there's exceptions, but to not even have that as an option is kind of biased
in the calculation. imo

If you go up North to live make sure you bring your own lady…

Same goes for any women reading this cuz all the women around here complain there are no men

I went up there to visit and all the sheep were nervous when Hard Tack drove by

:lol:

Facts:

I have the same job that I had in the LM. I've met many folks that have made the same move that I did.

A house comparable to mine would be over 1 million down there,I paid under 300k

There are plenty of jobs…all kinds,not just trades.

Simon, you're wasting your talents and skills down there. Don't tie yorself to some shitty condo in Cloverdale just because the area is familiar to you.

I'm now looking at Brand new Condos in Whalley. I have no friends, nor family up north. I'm not particularly good at meeting people. I can meet females down here. And am blindly holding out hope that one day I can be in a functional relationship.. Yeah sure I can run anything i sit in. And my talents are wasted being a service hoe down here. I'm ready to throw in the towel and go work for the railway for the rest of life anyways. The thing is down here, works steady, my pay cheques don't bounce. And I can find someone to eat a reasonable tasting dinner with. In dawson that was a hard quota to meet. And while I had a smoking hot girl in Dawson, with a BA and a job. She was an alcoholic who liked to dabble in coke. Living up north was less than positive for me. If anything it was depressing. But my pockets weren't empty when I came home.

the rail way ain't steady for at least the 1st 10 yrs the guys I know spend all the time out on the road missing functions that their wives go to and trying to mess with the CN system which is a whole job itself

dawson creek or dawson city, even tho its technicaly in BC dawson creek is really the Alberta petro state ?

http://northword.ca/august-2009/the-dame-drain

an artical written by a friend of mine ^^ on finding companionship in the north apparently its hard … for the women

won't depreciate much in value

Can you provide a list of other items that will not depreciate in value? I will be able to make a lot of money this way.