Prices in Columbus Grove melted down like The China Syndrome. I believe they will rise from the ashes one day.
Asking Price: $761,310
Address: 20 Honey Locust Irvine, CA 92606
{book2}
And the folks are risin for another day
round about their homes
The people of the town are strange
And theyre proud of where they came
Well, youre talkin bout china grove
Oh, china grove
China Grove — Doobie Brothers
In early July, I wrote about Columbus Grove this way:
Columbus Grove was the first Irvine neighborhood to see a collapse
in its mid to high end pricing. There are many theories as to why this
happened, and many readers who believe it is because the neighborhood
is not desirable. I believe it was something else.
Lennar starting building and selling in this community near the
peak. Since these properties were new, they sold at WTF price levels.
Since Lennar did not want to try waiting out the market, they continued
to build and sell during the early stages of the credit crunch. Their
continued production of must-sell inventory drove prices down quickly.
One can argue that prices would not have dropped as much if the
neighborhood was more desirable, but even in desirable neighborhoods,
they are still subject to short-term fluctuations of supply and demand.
Columbus Grove is a classic example of what happens to any neighborhood
when large amounts of must-sell inventory is dumped on the market. This
will be the fate of all mid- to high-end neighborhoods as the defaults
continue and the REO piles up.
In the forums, there is an ongoing discussion of why The Irvine Company did not keep building as prices were going down. IMO, the main reason they didn’t is because they did not want to create another Columbus Grove at Woodbury and Portola Springs. If they had dropped prices to finish out the communities like Lennar did with Columbus Grove, prices in those neighborhoods would be 35% off just like Columbus Grove.
Only time will tell wether or not this strategy made any difference. Prices are going to bottom were the bids are irrespective of the availability of supply. Columbus Grove arrived at this new price equilibrium quicker because the builder wanted to finish out the development.
There are many people on our boards who do not like Columbus Grove. Part of this has been in reaction to a former member we had to ban, and some of it is related to problems of the Columbus Grove site and neighborhood. Many have the opinion that Columbus Grove will never have pricing on par with the rest of Irvine. I think those people are wrong.
IMO, Columbus Grove pricing will find equilibrium with Westpark over time. The property is still in the city of Irvine, and students there go to Irvine Schools. For those who greatly value the Irvine School system — and there are many buyers like that — Columbus Grove presents an opportunity to own a large, relatively new property for the lowest price in Irvine. People will find value there.
Pricing in Columbus Grove will continue to deteriorate, but it is much closer to the bottom than to the top.
Asking Price: $761,310
Income Requirement: $190,328
Downpayment Needed: $152,262
Purchase Price: $1,349,500
Purchase Date: 8/24/2006
Address: 20 Honey Locust Irvine, CA 92606
| Beds: | 4 |
| Baths: | 4 |
| Sq. Ft.: | 2,780 |
| $/Sq. Ft.: | $274 |
| Lot Size: | 7,628
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Contemporary |
| Stories: | 2 |
| Year Built: | 1996 |
| Community: | Columbus Grove |
| County: | Orange |
| MLS#: | S583611 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 2 days |
large open floor plan with a large kitchen, granite counter tops; it is
located near freeways, shopping, entertainment and more. This property
is priced to sell and will not last long, submit your offer today!!
This property was purchased new, right at the peak, for $1,349,500. The owner used a $1,000,000 first mortgage, a $214,000 HELOC and a $135,500 downpayment. The lender took it back at auction for $705,500. If it sells for its current asking price, and if a 6% commission is paid, the total loss on the property will be $633,869.
This property is being offered for $44% off its peak purchase price.
And so concludes another week at the Irvine Housing Blog, chronicling the Irvine home market since September of 2006.
Have a great weekend.
🙂
The facade looks fugly.
The fugly facade goes well with the toxic, cancer-causing chemicals lurking 4″ under the topsoil.
If you don’t care that your kid is going to get cancer when he plays in the back yard from the chemicals dumped there by the Marines, do you really care what your facade looks like?
Looks like Bart Simpson in a way.
I agree, pleasant house, it is in Irvine, it is desirable. There is a fair price point for it. But I still can’t get over that initial number. It boggles the mind. Somebody paid $1.3 million for THAT?
When they had open houses for these I couldn’t believe the amount of people looking at $1.3M homes. That’s when it clicked that something was wrong…
Or perhaps I should have written, somebody agreed to LOAN somebody $1.2 million for THAT?
other people’s money!
Yours and mine!
So that somebody is us, effectively!
Do you feel better now?
🙂
I’ve spoken with several people in the building industry who have said that one of the problems in California is that the environmental regulations make it almost impossible to time their building to the market. Once they start a project, they have to finish it or risk their Environmental Impact Report going stale. If that happens they have to start the process of getting another EIR done and approved, and ANYTHING can derail that process, meaning it could take years.
So basically, instead of minimizing the impact of development on the environment, the regulations have actually contributed to the overdevelopment you see in places like Orange County. (I’m not anti environment. I’m just pro critical thinking so that unintended consequences like this can be mitigated.)
Orange County is not overdeveloped. If it was, prices would be lower.
The Riverside County desert is overdeveloped. Victorville is overdeveloped. Orange County, not so much.
I think a good test whether or not a place is overdeveloped is when prices fall below construction cost. At that point, development of new projects should cease, except for an occassional one off by the owner to live in. $274 a square foot (quite cheap for Irvine; this should sell above list) is significantly above construction cost.
It, however, is smart for the Irvine Company to not rush things, because the own the land outright and prices will recover eventually. They are thinking long term.
We really need to put an end to this meme that the Irvine Company was smart to stop development when the market started declining and is smart to be developing slowly right now. It seems that the Irvine Company has the long term strategy that they will develop a lot of land when home prices are high and hold back when prices are low. This is a good strategy. But here’s the problem; they are not executing on it. Right now home prices are very high, but they are not selling because they incorrectly believe that home prices are low. When they finally realize this they will find that they have wasted the chance to capture some great near-bubble prices.
IMHO, house prices in Irvine have nowhere to go but up, excluding seasonal variations. I’ve been calling bottom for a week or so now, and I stand by that call.
Fair enough. I guess if I agreed with you on that point then the Irvine Company’s behavior would seem less maddeningly self-destructive.
The Irvine Comapny has a monopoly on housing in Irvine. There is nothing else for them to do but manipulate the price. There is no free market for real estate prices in Irvine.
The vast majority of home purchases in Irvine every year do not involve the Irvine Company at all. Are you sure that you know what the word ‘monopoly’ means?
Agree.
But it’s not completely outside their influence.
TIC has 90+ % of the rental market via IAC, which can sway equivalent rent multiples.
They own the dirt for new construction (and are in fact going toward a fee-based builder model, which heightens the control on costs), so they have significant influence on new home pricing.
The ‘third leg’ of the pricing stool would be foreclosures and short sales, which is outside their control.
Love them or hate them, it is the Irvine Company that has created the city of Irvine. Since most of us are attracted to Irvine for one reason or another, it stands to reason that the Company deserves some credit for how they have developed it. I was a little amused at some of the earlier commenters, who implied that the Irvine Company has some sort of social responsility to build lots of new housing in a declining market. Such a strategy would make the current situation worse by increasing the supply at a time of a market collapse. I suppose someone could make an argument that such a move would clarify the market under a ‘big bath’ theory, but it certainly wouldn’t be a rational move for them to make.
They don’t have any social responsibility to new housing in a declining market. But if prices are relatively high now compared to what they are likely to be in the future (which they are) then it is actually in The Irvine Company’s OWN SELF INTEREST to do so. They’re just too dumb to realize it. Thus, they are hurting both the people who want to buy new homes from them, and also themselves.
I didn’t mean overdevelopment from a business/construction standpoint. I meant overdevelopment from an environmental one. There is already more building in Orange County than can be supported by the resources available (e.g. water).
My point was that the decision of builders like Lennar to finish out a project even if it doesn’t make financial sense is partially driven by the fact that if they don’t finish, the EIR will go stale, and there’s no guarantee that the can get another one approved. It’s ironic that regulations that were meant to protect the environment have just led to more building.
It depresses me every time I have to fly into John Wayne to see the miles upon miles of development in virtually every direction.
Irvine did overdevelop with condos near the 405 and Jamboree. Other than that, they build pretty much what they sold.
Many people are debating the efficient market hypothesis, with nearly all agreeing on the one point that there is no free lunch, but harsh debate on the second that prices accuratly reflect cumulative knowledge.
Is knowledge always true? Consider the number of people who thought home prices always went up, the number (in 2006!) that were expecting > 10% increases ad-infinitum. If you think of knowledge as what people ‘know’ than home prices reflected knowledge, even if they did not reflect reality. You can even have some with reality based knowledge, but if they are so far outweighed by bubble thinkers holding false beliefs, the integrated knowledge still skews to the fale beliefs.
This is one of my main criticism of people who think prices are always ‘correct’. As thing change, do prices reflect these changes instantenously? No system operates without lag, and for many things, there is a strong inertia that increases that lag. In any feedback system, if the phase lag is too large the system becomes unstable.
The housing bubble reflects a time where average collective knowledge took a few years to reflect reality, creating a bubble situation.
Real estate markets have very long lag times. In August of 2007, when the credit crunch began and toxic financing was eliminated, real estate markets overnight were devalued significantly (+-50%). The Option ARM allowed people to finance double what a conventional mortgage would finance, so prices were inflated 50% at the peak.
If real estate markets were like the stock market, the sudden disruption in value would have been quickly reflected in prices. Stocks can “gap” by large amounts if a company needs to be revalued. A 50% change can happen overnight. Even when information is slow to the market, prices can change relatively quickly. Real estate markets are not so fast to correct.
The main driver of lower home prices is the reduced ability to borrow large sums of money. The Federal Reserve knows this, so they engineer 5% interest rates to keep the borrowed amounts as high as possible while converting back to sustainable loan terms. The net effect is that house prices need to drop 40% to reflect the change in the amounts available for financing.
For a real estate market, San Diego has corrected quickly:
http://www.voiceofsandiego.org/storyart/2housingbusts_may09.jpg
Orange County’s chart would be similar. It takes years for real estate markets to correct whereas stock markets can change in days or months.
How do you come up with the “40% to reflect the change…” figure?
What your graph does not show is the build-up, where the 1990 line was up 30% from previous ‘stability, but the 2005 line is up 250%.
40% implies 60% of 250% (150%) of the previous value is the new ‘sustainable’ value. Does the combination of income growth and low interest rates over the past 10 years “allow” housing prices to have risen 50%?
“How do you come up with the “40% to reflect the change…” figure?”
I got that from Predictions for the Irvine Housing Market
The combination of income growth and low interest rates does sustain values at higher levels, but how much lower can rates go? and how long can they stay this low? Has income growth been positive lately?
I think the national market and some local markets (not Irvine) are at a temporary, government-induced low. If the government can create a false bottom from its intervention, we are experiencing it now. I think the market is bigger than any government effort, but we will see.
Maybe the difference is San Diego has a much higher military presence – and those guys/gals have to move when they are told to and are less likely to pay BS pricing. Maybe its because salaries down there are lower?
The Point Loma credit union – a San Diego based credit union has just shut its Corona and Oceanside locations – it can’t afford the expansion northwards so it is contracting ie those branches weren’t bringing in deposits enough to justify their continued existence.
I would have expected OC to contract faster than SD because of all the scheisters who worked in providing liar loans, HELOCs and the like – and Irvine seemed to be their HQ. Those guys/gals made massive amounts of money, and now they don’t. So that’s money they can’t spend, and houses they can’t service the debt on.
Its yet another example of well I would have expected Orange County to crash faster – and I’m wrong… and I can’t figure out why I’m wrong.
Naw, it doesn’t have anything to do military presence, salary levels, or any other factor that affects the “fundamentals” when it comes to housing valuation. As winstongator very astutely points out, home prices are sticky on the downside largely because human beings take years to mentally process things and to gradually shift their expectations of future appreciation. I think the main difference between SD and OC is simply that their housing bust just got started about a year eariler than ours (go look up the Case Shiller indices if you want the gory details), and so they got a head start on us in resolving their collective cognitive dissonance regarding home prices. Now as to why it started earlier… that I don’t know.
$274/sq foot is close to the bottom? 44% off is impressive though…
At $225/sq ft or $625,500 I think people could see this as a good value (for Irvine) despite the ugly facade.
But in general, yes, when a neighborhood has all the amenities but is priced significantly lower, people will see value in it.
IMHO, Irvine overall is at the bottom right now. House prices have been stable for ten and a half months-that’s a bottom, IMHO. There will probably be a slight seasonal drop during the winter, but that’s about it.
if it were 10.5mo w/o outside intervention, I would totally agree.
You have become bullish since you bought your house in Riverside; in fact, many on the blog have turned bullish, mostly due to an insignificant spring rally.
http://www.voiceofsandiego.org/storyart/2000shomepricerallies_may09.jpg
It is very unlikely Irvine is at a bottom. It is far more likely that prices will continue to fall for the next several years.
You are closer to a bottom in Riverside as most properties already trade a discount to rental parity, but prices there are not going up any time soon.
I most certainly do not think prices in either Riverside or Irvine will be going up significantly anytime soon-I’m just saying they’ve stopped going down. I’m calling a L-shaped bottom, not a V-shaped insta-recovery.
I also am not sure about Riverside being at bottom (prices were falling in Riverside until May, while Irvine’s prices stopped falling last September). I lucked out and bought at about a 25% discount over comps (I paid about $85/sq ft when comps were about $115/sq ft), and I don’t think prices will drop more than that. Plus the eight grand was a factor, as well as low interest rates, as well as a desire to get out of my dump of an apartment ASAP.
$85 a square foot? Wow, that’s uber-cheap. Of course, Riverside is a mangy mutt of a place to live, but still an incredibly affordable price.
While the artificial tight supply coupled with a pool of large cash/down payment buyers may provide a temporary floor for Irvine housing market, I am still wondering where the long-term support for this market will come from. Prices for all segments – low, middle and high end, remain detached from income level. And rental parity is no where to be seen. So I guess that people calling bottom in Irvine might base their view on two assumptions:
1. low sales volume and large cash buyers will keep the market stable in the short term
2. a quick economic recovery and job/income growth will provide the second stage (and a more permanent) support once #1 wears off
But the problems is that:
1. the current tight supply is not sustainable. Foreclosure rate has skyrocketed since early spring and will likely to climb as more alt-A and Option ARMs become distressed. And how long can lenders keep REO inventories in the shadow?
2. the large cash buyers (savers) pool will dwindle quick. Savers as a percentage of population in Irvine may be slightly higher than nat’l average due to variety of reasons, but they are a tiny minority group in our society nonetheless. If we were a nation of savers we would not be in the economic dire straits today. So once the demand from large down payment buyers dries up, then what? Low end market already collapsed, and can we reasonably expect owners of low end properties to cash in on their equity (if there is any) to move up?
3. that leaves the only hope to economic recovery and wage growth. If you believe this economic downturn is just one of those typical post-WWII mild recessions caused by inventory cycle adjustment, then I guess you may be fine. But if you are like me and many others, who believe this is the economic and social calamity caused by the ending of a 25-year giant credit bubble era with housing bubble being its climax (arguably the largest in human history, although some say Japanese bubble in 80’s was even bigger), then you probably would not view the ensuing debt deleveraging and sectoral restructuring as conducive to a robust growth in employment and wage income. IMHO the only suspense left is whether we are going to have a stagflation (best case scenario, similar to 70’s but more stagnant and last longer), or a Japanese style stag-deflation (worse case scenario).
and the question remains – once the big savers all jumped in, but foreclosure sales keep coming, then what???
I got an excellent deal due to a combination of factors, the main one being that there was a large addition which was permitted by the city (The City of Riverside has all building permits on their website, going back to prior to World War II, so it was easy to check), but never made it to the tax rolls for whatever reason, so the listing showed the pre-addition square footage. So, at first glance, it looked like an overpriced small house as opposed to an underpriced larger one, so few people even bothered to look at the house, so I had little competition. It was a fluke that I took advantage of.
Now, out in the desert, you can find nearly new houses for $65/sq ft or less. But those places are to Riverside as Riverside is to Irvine-way out there.
On Japan…it hasn’t been all bad over there. I have a good friend that lives in a sweet little beach town ~1 hr train ride from the office in Tokyo. He bought a 3/2 oceanfront condo (desirable in Japan)- known as a “mansion” – for ~$400K USD. He doesn’t expect it to ever go up much, but it’s a nice place to raise the family. SFRs in this neighborhood start at $800K. He makes more than double the Irvine median and is well educated. Deflation has been good to him.
Deflation is generally favorable (or at least, less painful) to those who already have lots of money. That said, your friend has a minimum 1 hour train ride each way, every day. Commuting in Tokyo is never fun, and that commute would get real old, real fast.
I’m not bullish, but homes are selling like hotcakes in Columbus Square, at just 15% below peak pricing. It’s weird.
Yeah, the prices in Columbus Grove will one day rise from the ashes.
One day in 2015
What is the assoc dues and mello roos for that property? I actaully took a look in Portola Springs and once I heard the dues and mello roos rate, I got in my car and drove off.
Looks like it’s sold. I would actually consider buying it too if I had the down.
And the income requirement hehe.
Not sold. Just off the market.
Just taken off of redfin…not necessarily sold.
This is one very, very ugly house. It has the appearance of bad wallpaper — on the outside.
Hmm I like the look. Wish I could see more pics.
If you look at the Redfin sattelite view, you will notice another downside to this property — it is right next to the high-tension power line pole. What a view for $761k!
In fact this property is overpriced at that level for one notable reason (in addition to the many others): There is a short sale listed about ten houses down at 40 N. Desert Willow at $268/sf. So not only is the price less – but you are now significantly farther from those ugly powerlines.
Prices on short sales, like everything else about them, are mostly fictional. It’s not uncommon for short sales to be listed at prices significantly below sold comps-doesn’t mean they will sell for that much, or at all (before the bank forecloses).
Don’t forget it’s not to far away from the industrial area of Construction Circle to the northwest of Columbus Grove. I remember that is where Waste Management is located. So, prices will have to come to a point where you don’t mind the high tension power line and garbage processing center. Rental parity anyone?
There’s a special minty smell that emanates from this area, just before you hit Jamboree/261.
Reminds me of potpourri sprayed following a visit to the restroom.
You pay extra for that.
Yup, used to smell it everyday on my way home down Warner with the windows down.
This is one of the reasons why this area will never compare to Westpark, IMO.
Looking at the over head map it’s a good size lot. It looks like the garage is way in the back. But it’s at the corner of Harvard/Warner. Have you noticed how Columbus Grove “greenbelt” is set much closer to Harvard than the Westpark area directly across Harvard? Thus, the CG houses bordering Harvard are built very close to Harvard.
**blinks**
Is the facade really that high, or did the realtor decide to experiment with a long-angle lens? I feel seasick just looking at the picture.
Nor can I muster much Schadenfreude for the WTF price. $1.2M to buy an ugly house loses much of its shock value when I’ve seen at least 50 other such purchases in the past year. $761K+ to sell? *yawn* I won’t have time for a decent nap before Redfin yanks it off the list, if it isn’t gone already.
It does sort of look like it’s on stilts, or stretched vertically. Strange looking house.
Pinstripes really do make you look taller and thinner. I didn’t believe it until now.
$700,000 seems very high to me for mass produced housing. It may seem cheap relative to what is out there, but it is not that far below the peak. I probably would never pay that much for a house. And that part of Irvine seems like the worst and cheapest housing, and most densely packed. Not to mention ugly. I think in the future they will become the cheapest.
That particular house is on a huge (for Irvine) lot of 7,628 Sq. Ft (~.175 acres). Not too densely packed, IMHO.
What’s that coming out of the drive way? Blood? Tears?
Honey, the toilet’s overflowing again…..
Tears.
The kool-aid wore off and they just realized how utterly fugly their house is-
The ming boggling thing all along was that people were paying so much money when these homes were new.
Or, more likely, they were not paying anything. The banks were giving them away so people didn’t give a hoot what the price was.
At a no money down, 1% teaser rate it was really a no loss proposition. It goes up, you sell and make money, it goes down.. well… real estate NEVER goes down.
However, when you looked at this homes in the Irvine flats… going spanking brand new for the same price as homes in Turtle Rock? Now, that was NUTS.
So, now, in TR we’re down 35% or so from the peak but very homes are on sale. Meanwhile, areas like these are ALL on sale. Yikes, a 50% discount from peak is likely too kind.
banks gave out free money to buy house… gov’t is now giving out FHA free money to buy house … and gov’t will also hand you $4500 to buy a car if you happen to own a “clunker”. what a great world we all live in …
Honey Locust? Really? Makes me think of biblical plagues…
All I can say is “wow.” Oh, and they had it comin’
Against…
Fugly Design…check!
Near Busy intersection…check!
Near Powerlines…check!
End of a cul-de-sac (bad feng shui)…check!
For…
Granite and Stainless…CHECK!!!
It’s a winner!
Something strange about this house, I actually looked at this house back in Aug/Sept of last year on a lease. They were asking around $3800-$3900 a month for it. When we walked in, the entire upstairs carpet area over the portaco was being removed due to a major water leak in the laundry room. The owner was broker or agent. I remember the agent removed the listing about a month after we viewed. I noticed on RT that the house went to sale for like 640k or around that price? DOn’t have all of the details anymore but this is either a flip or somethings amiss.
BTW I’m in my second rental that is in foreclosure in Tustin Field in less than 12 months. Actually they are all around me. I don’t see the bottom yet.
“…in reaction to a former member we had to ban,” who is IrvineRenter referring to?