Columbus Lost

Columbus Stockade Blues — Brother Oswald

One of the myths about Christopher Columbus and his voyage to discover a quicker trade route to the East was that he had difficulty getting crewmen to serve because they believed the world was flat, and if they sailed far enough, they would fall off. Similarly, one of the myths about residential real estate is that prices always go up, and if they rise too high, they will not fall off. The people who bought in Columbus Grove did so right at the peak, and the continuing activities of the builders finishing off the community pushed their resale prices off the edge of the flat earth. The drop there has been remarkable.

The Columbus Grove experience shows what happens when large amounts of must-sell inventory is concentrated in one place. When prices become extremely inflated, and the market finally starts to fall, it creates a downward spiral that does not abate until prices are at fundamental valuations. However, the rate of decline is largely dependant upon the amount of must-sell inventory in specific areas. So far, the areas that have fallen the quickest have been those with large percentages of subprime loans (Santa Ana,) large numbers of new homes (Columbus Grove,) or both (Riverside County). This does not mean that the neighborhoods like those in Irvine are immune from the crash, it will just take longer here, and since it will take longer, they may not fall quite as far on a percentage basis because rents and incomes will be increasing as prices fall (we hope). Irvine and other neighborhoods will fall in time, most likely when all the Alt-A and Prime ARMS reset.

22 Honey Locust Kitchen

Asking Price: $880,000IrvineRenter

Income Requirement: $220,000

Downpayment Needed: $176,000

Monthly Equity Burn: $7,333

Purchase Price: $1,226,000

Purchase Date: 8/31/2006

Address: 22 Honey Locust, Irvine, CA 92606

Beds: 5
Baths: 4
Sq. Ft.: 3,168
$/Sq. Ft.: $278
Lot Size: 7,500

Sq. Ft.

Property Type: Single Family Residence
Style: Mediterranean
Year Built: 2007
Stories: 2 Levels
Area: Columbus Grove
County: Orange
MLS#: S537818
Source: SoCalMLS
Status: Active
On Redfin: 61 days

Great Value Columbus Grove’s Fine Home. Highly upgraded with dark wood
floors, designer carpet and travertine & tile floors throughout.
State of the art family kitchen with oversized island with
wine/beverage cooler, 6 burner stove, granite counters and stainless
steel appliances. Custom wought iron stair case, wood shutters and
custom window shades throughout. Master Suite with retreat &
romantic fireplace, spacious walk-in closet with custom organizers,
luxurious jetted bathtub. 4 Bedrooms upstairs, 1 main floor bedroom
& bath, office/den downstairs. Desirable floorplan for a growing
family with 3 car garage. Oversized Great room/Family Room with
fireplace. Corner house at the end of cul-de-sac. Great Irvine Schools
and Association Club house, pool, BBQ & Parks. Close to the
District Shops and Restaurants. So much for the value.

IMO, the front elevation is ugly and boxy.

This property is being offered for 28% off its peak purchase price. Since fundamentals have not caught up much in the two years since this was purchased, it is probably only a little more than half way to its bottom value. This property was at least 100% overvalued at the top, so a full 50% haircut is in order to get the price back to sanity. Maybe in 2 or 3 years if incomes have gone up, this property might be worth $700,000, but on a breakeven cashflow basis today, it is probably only worth $600,000.

The owner actually put some of his own money into this deal. The property has a $980,700 first mortgage and a $184,000 second mortgage leaving a 61,300 downpayment. That loss probably stings a bit, but it is the lender who is getting really hosed. If this property sells for its asking price, the total loss will be $398,800 after a 6% commission. Greenpoint Mortgage originated the loan. There is no telling who owns that toilet paper now.

In many ways, this former loanowner is one of the lucky ones, he has escaped his debtor’s prison. The rest of the neighborhood is trapped, and 15-25 years from now when values get back up to the peak prices they paid, they might be able to get out…


Way down in Columbus, Georgia
Want to be back in Tennessee
Way down in Columbus Stockade
Friends all turned their backs on me

Go and leave me if you wish to
Never let it cross your mind
If in your heart you love another
Leave me little darling, I don’t mind

Last night as I lay sleeping
I dreamt I held you in my arms
When I awoke I was mistaken
I was peering through the bars

Many a night with you I’ve rambled
Many an hour with you I’ve spent
Thought I had your heart forever
Now I find it’s only lent

Columbus Stockade Blues — Brother Oswald

61 thoughts on “Columbus Lost

  1. cara

    From the outside that looks like three houses smashed together in a freak macro-scale-quantum superposition. A new white colonial peak-roof, a 70’s vinyl sided and a 1940’s brick post-war boom house. Abracadabra!!

    1. eastcoaster

      The third garage looks like a shed slapped on the front of the house. Tacky – real ugly for that price.

      1. former_irvine_resident

        Wow. Reading this post via bloglines I couldn’t see the pictures. I was curious and clicked the redfin link to see how nice this place must be and was just shocked. This place is just fugly! This is in Irvine? It looks like Santa Ana for heavens sake! A ramshackle mess… Ick!

    2. edmund west

      Here in New England we like to put the lean to out back. I know its a know-nothing dont-know-Irvine point of view but this crap architect probably dropped out of realtor school. For once Im voting with AZ.Dave. My price for this hell hole $250,000 as a rental. To live in it I would have to go blind first.

    3. ET

      I thought for a second that this was the back/side of the house so I had double check to see if there were other photos that would clear up the confusion. There were not. For drive by appeal – which is very important – this house is a total looser.

  2. Emma Anne

    “So much for the value.” I don’t think that came out right . . .

    When I was a kid and wondered if I’d someday have a million dollar home, it sure didn’t look like this. It’s nice enough, but it looks like everyone elses house. Beige, brown, white, bland. My million dollar home of my dreams at least had a skating rink and a bowling alley.

  3. GoIllini

    “…because rents and incomes will be increasing as prices fall…”

    Really? That doesn’t seem to be happening, (IMO). I think there is an observable drop in rental rates in Irvine, along with an increase in vacancy rates.

    1. Jai

      I agree, I have seen rental prices going down at least in Northwood area. 2 Bed room 1500 SQFT single family home, last year was asking for 2100, and recently he was able to rent it out for $1800 two weeks back. There and tons of houses available for rent.


  4. Larrygg

    Ugly, Ugly, Ugly!!! Who in their right mind would of spent $1.2 Mil on that mess? And now they will try to get another sucker to pay $880k? Don’t think so.

    1. Anthony

      Don’t forget that there’s a sucker born every minute(?) in this country.
      Home sales were up last month…Houses are sold every day in Irvine…Look at Redfin. There’re more and more “Backup Offers Accepted” listings.
      Unless the realtards are playing some tricks on us……:-)

  5. George8

    It looks like a great home to have for life. However, price is not right yet.

    IR, thanks for the analysis. Let us wait for $600k-$700k whenever it comes.

    1. MalibuRenter

      You are assuming there was an architect. For most single family homes, there isn’t an architect.

        1. IrvineRenter

          Some of the production builders use internal architects, and some use outside consultants. The architects design 3 or 4 models which are built 25 times each. They change around the front elevations and make them look different, but they are production units.

        2. MalibuRenter

          A large number of homes have no architect because a master design was submitted and variations do not have structural differences.

          Frequently in CA, a licensed engineer is used instead of an architect. The civil engineers might give you something that will stand the test of time, but that the neighbors really hope gets replaced by something better looking.

          A house might be also designed by a nonarchitect at a firm with a signoff from a registered architect.

          Especially in unincorporated or more rural areas, you might not need an architect or engineer.

    1. cara

      I like the house better in that one, but the decorating is distracting to say the least. A Gigantic Clock in the family room. Three styles of seating at the dining room table, none of which are appropriate for eating, a huge C on the baby’s wall, and random little stuff under the master bed. Odd odd odd.

      Let the price drops continue to roll, baby, and some of these will be great houses at the right price.

    2. Alan

      Agree – IRs house today is a complete mess from the outside. Perhaps it is worth $600k minus the cost of architectural repair surgury. The shed leaning against the front was exactly my impression as well. This second house looks not only coherent, but considerably better from the outside. Also in that it has some trees and bushes, at least in the front.

      The inside is definitely strange. As they say, there’s no accounting for taste. Putting a big “House” label in the living room is an interesting idea, or maybe someone in that family unfortunately suffers from Alzheimers.

  6. Don

    Ive driven down this street and right in front of this house are HUGE power lines. UGLY UGLY UGLY

  7. OCMAN

    These are big and new houses in VOC and Tustin Fields. Althought the price look attractive, their HOA and Mello Roos are outrageous. I think on average it’s $1000 a month without insurance and tax so monthly house expense for this $880k house with 20% down could be still close to if not more than $6000. Wow…

    However, my question is would we still see $600k price level for this kinda house in 2 years? I certainly hope so as a waiting buyer but I keep hearing rich foreign buyers gobbling up newer houses with 20 to 30% cut from top with cash. Even today, news reports are saying that price decline rate is slowing down and the sales for July is up almost 3%.

    1. IrvineRenter

      “I keep hearing rich foreign buyers gobbling up newer houses with 20 to 30% cut from top with cash.”

      That nonsense is brought out in every market crash. Rich people did not get rich by speculating in depreciating assets.

    2. ConsiderAgain

      What and where is “VOC”? I assume there is another meaning outside the vapor pressures of various organic compounds.

      – Thanks

      1. Forbear

        Villages of Columbus, at the corner of Harvard and Warner. Not far from the trash processing plant. 🙂

    1. MalibuRenter

      Well, the Case Shiller results are in for June, and they show price drops slowing. In cities without big bubble problems, prices were actually rising (Dallas, Charlotte, Atlanta). Homes are much more affordable there, and much closer to the cost of renting.

      Even the bubble cities are seeing slower price drops. I interpret this as many of the flipper/speculator/fraud homes as already making their way through the foreclosure process. They didn’t try to keep the homes.

      Now for the bad news (at least for homeowners). This is an invitation to be a sucker/knifecatcher in areas that remain unaffordable. In those places where Alt-A was common, the problems are building quickly.

      Even in areas without much Alt-A, watch out for the redefaults. Those are the loan workouts which don’t actually work out in the long term. They just become delayed foreclosures.

      Also waiting to cause trouble is any substantial rise in interest rates and further contraction in underwriting standards.

    2. furious sugar

      I had heard that existing home sales numbers are reported on close of escrow, while new homes sales are based on homes entering escrow. Not sure if this is correct… but, if the June numbers reflect closed escrows– that means that most of these homes entered escrow in April or May.

      Most of the homes I’ve been watching are just sitting on the market now. So I guess that the October numbers will go down again.

  8. Beinformed

    This house sits on TOXIC land. All the homes built on the old marine corp base are sitting on TOXIC DEADLY CARCINOGEN, called TCE. It is in the soil and has contaminated the water and air. This was a cleaning solvent that the base used to clean the aircraft. It was suppose to be removed and cleaned up, but no proof that it was. There is a website that explains this in detail, along with other old marine sites listed that have air and water contamination. El Toro is another. People living there have just put themselves and their families at risk. Check it out at Wouldn’t touch this with a ten foot pole!

    1. fencewalker

      Thanks beinformed for the link. I’m with you on avoiding these areas! If you can’t even garden or grow fruit and veggies safely in your own yard, then what’s the point?

      1. east coast LC

        Remember a couple of weeks back when that guy asked about why a property didn’t have any green technologies? Interestingly, these comments illustrate the back-end of his questions. Forget the environmental quality-add-on to list price, note the drop-off in value due to the anti-environmental factors.

        I keep seeing green technology and environmental ads, signs on trucks, and, also, the proliferation of the green channels/programming on cable–I know it’s a fad–and wonder about the effect on home prices. Like what a SUV’s MPG did six or so months ago to the value of SUVs today.

  9. CK

    I’ve noticed that Tustin Field seems to be collapsing badly as well, more so than Columbus Grove is at this point. IMO, Tustin Field is much better done (with far nicer looking homes) than its CG neighbor. I find most of the homes on and around Voyager to be pretty appealing.

    I suppose the collapse of Tustin Field is what we will see in Columbus Grove in a year or so — It’s probably just that the CG is so new most of their ARMs have not reset yet.

  10. Blueberry Pie

    I am not all that familiar with Irvine. Are there areas of Irvine that are actually nice?

    It seems like the comments for every one of these posts has people saying why a house is in a bad neighborhood. Freeway noise, busy streets, etc.

    1. Matt

      It’s to be expected in a blog like this that people will “pile on” the houses listed. Most of those posting on the blog are bears, and I have to figure that some of that bearishness is psychological (which is not the same as saying it is a bad thing–I’m just saying that, given the prevailing real estate religion and Kool Aid consumption, bears can be reasonably expected to approach real estate differently than others do). And, I think, some of that comes out in simply trashing a place that is overpriced on reasons other than just price.

      Moreover, just as the Kool Aid drinkers would rationalize away the flaws in a place, so too does a bear focus on flaws. This might be especially easy to do once a decision has been made that this place is not “worth” the price.

      As for the larger question you ask about whether Irvine is nice or not, it is what it is, and some folks like that and some folks don’t. On measures of things that are nearly universally appreciated, like low crime rates and good schools, it tends to do well. However, CK’s response below points out a number of reasons a given person may or may not like Irvine: HOAs, master planning, city layout (with housing areas generally isolated off of major thoroughfares), types of people who live there, location, types of local merchants, etc. For some, those things will be a net positive; others a net negative. But, generally speaking, Irvine starts ahead of many communities based on the more universally liked characteristics of crime and schools. For myself, these things end up making Irvine a net positive, but not so overwhelmingly so that I would pay a large premium for Irvine. Others would pay a great deal more for Irvine, and some would pay more to NOT live there.

  11. CK

    The entire city of Irvine is very nice, even the areas with older 1970’s homes. When I think of LA/OC as a whole (excluding exclusive coastal and hillside communities), Irvine is definitely in the Top 10% nicest inland/flatland communities. If you like master planned, then it is probably the nicest of all. On top of that, add in the central location, school system, and safety — and it is a very desireable place.

    The people who post negative remarks about Irvine here 1) seem to have never been here, or 2) have a profound hatred of master planned communities, and the people who dwell in them. Those in the second category of Irvine haters usually say something like “Irvine will never be a world class city like San Francisco”. Uh, like anyone who lives here wants to be San Francisco. Not that there is anything wrong with SF if you are into that sort of place. I loved SF when I was 25. Why those people waste time coming here to disparage Irvine is beyond me.

    1. IrvineRenter

      Further evidence for the desirability of Irvine is the higher median incomes of its residents. The real genius of the Irvine Company is in creating a master plan that commands a premium over neighboring properties. People who chose to buy and live in Irvine could live anywhere in Orange County. The fact that the median income is 25% higher than the rest of the county is testament to its desirability.

    2. Hormiguero

      There’s always an extra element of pleasure in schadenfreude when it involves the downfall of an entity which was formerly smug in their untouchable status.

      It’s also nice to see not just the return of basic economic fundamentals, but the just punishment of those who have absolutely no taste. The Irvine housing crash satisfies both in spades.

      Of course, these things are all in the eye of the beholder. What Irvine does, it does well. But the IAC business monoculture, total lack of walkability, depressingly endless cookie-cutter architecture, creepily empty highrise district and lunar landscape of the northern parts of town are certainly not everyone’s cup of tea. But the lack of crime is nice, and the job scene was great until the real estate ponzi scheme which served as the backbone of the employment base vaporized itself.

      And why does everyone use SF as a base of reference? It is a town of a little over 800K in a state of over 30 million which could geographically fit inside Irvine easily with 20 square miles to spare. It is also 2/3 renter, over 1/3 asian, largely built before World War 2, has a September average high only 24 degrees warmer than its average January low and contains more homosexuals than kids. Basically, it has absolutely nothing in common with any other city west of the Rockies, if not the world.

      Still, as far as I’m concerned, both places represent a certain extreme which caters to a very narrow group. Fetishized normality is just as odd as fetishized freakiness, if not much more so.

    3. former_irvine_resident

      I loved Irvine. Great weather, great schools, well kept neighborhoods. Prices got out of hand so I cashed out and left. Would I move back? Yeah. To this village? Hell no. That house is an architectural train wreck on contaminated soil with power lines and massive HOA and mello roos. Uh, I’ll pass for something a bit nicer thank you very much.

      By the way, moving my money to Charlotte appears to be paying off – up again this month in Case-Shiller. 🙂

  12. idrnkurmlkshk

    Personally I thin Quail Hill is the nicest location in Irvine. But their prices have a long way to go in dropping.

  13. idrnkurmlkshk

    “Not that there is anything wrong with SF if you are into that sort of place. ”

    LOL! Are you kidding? SF is a S$#^-Hole today. It used to be a nice city back in the 90’s. But to day it’s a safe-haven for criminals, bums, and has more toxic housing laws on their books to drive every real estate investor out.

    In fact their mayor is running that city into the ground so bad, not to mention the police chief who plans on resigning soon.

    1. CK

      LOL — I liked SF when I was in my 20’s — which just so happened to be in the 1990’s. Was just up there last week for a Giants game — in and out of the city in 6 hours. While AT&T;Park is still fantastic, stepping through bum feces and rubbing shoulders with all those bohemians and their dredlocks (who seemingly shower once a month) to get to the stadium dillutes the experience a bit….

      1. Matt

        Again, it’s all a matter of tastes, though.

        Personally, I would pay a larger premium to live in SF than in Irvine…significantly larger. I greatly prefer the weather there, like the public transit, love the local restaurant scene, my Oakland A’s play just across the bay, etc.

        Really, Irvine and SF are very far from comparable: urban vs suburban, fairly different demographics, etc. If you’re going to compare Irvine to other cities, I think that you might start with a list of: Fullerton, Yorba Linda, Rancho Santa Margarita, Orange, Costa Mesa, Tustin, Huntington Beach. You start to get to things approaching some degree of similarity there (though, obviously NOT the same, they are all at least Orange County suburbs of decent size and above county median income (I think)).

        1. CK

          That was my point all along, Matt. The cities you list are all very fair comps to Irvine.

          Lots of Irvine detractors come here and make silly comparisons like “Irvine will never be like SF or any other fill in the blank random city”. Of course it won’t — Irvine has its corner of the market, SF has its corner. We don’t want to be them, and they don’t want to be us. I was just wondering aloud why so many folks like to come to the IHB and trash Irvine because its not where they live.

          Personally, I just think they are jealous that they don’t have anything as cool as IHB for their own town….

  14. Beinformed

    Referring to “nice neighborhood”. I will assume, that nice means safe? And also referring to “planned communities”. I consider a nice neighhborhood to be one that is not toxic to you or yours. Unfortunately, many “planned communities” are not completely “safe” for the communities. The public’s health was not an issue for the developer or the Agency at time of developing. Money is always the fundamental factor. I have lived in Irvine, and yes it is pleasing to the eye, but it is surrounded by power lines, power lines have long been an issue with health and development of young children, I find it ironic that Irvine is a benchmarked to be a family planned community and most of the elementary schools in Irvine are surrounded by power lines, is this not an issue for people? Also wherever you buy a NEW home, research the area to find out what was there before! There is a large area in Tustin/Orange that use to be a landfill, I have lived in O.C. for 30+ years so I know where the landfill was, I use to go and dump stuff there. Now it is full of family homes, I wonder if they know they are sitting on top of a landfill? I know they did not move the waste just so they could build homes there.

    1. fencewalker

      The same with Newport Coast off Bonita Cyn. Do the people there also know they’re living ontop of an old dump and landfill? They must, as you can see the field of gadgets that must serve for methane release and monitoring?

      And, yes, powerlines are a huge issue to me, as are cell towers! I’d rather rent than subject the health of my family to these “nonissues.”

  15. Major Schadenfreude

    I’m guessing this was a young couple who saved up their downpayment ($61,300 – kind of an odd amount) and purchased a house they thought was commensurate to their social status (perhaps professional DINK’s) and one in which they could start a family.

    I feel sorry for the folks that were “playing by the old rules” and will lose their hard earned money. I don’t feel sorry enough for them to have the tax payers bail them out however. After all, they bet against me (and all renters) and they lost.

    What is sad is that pricks like the one profiled yesterday (i.e., million dollar house with NO MONEY down) walk away without a scratch (except for bad credit record) and the downpayment folks actually lose hard earned money. The former contributes to the latter’s loss when they quickly walk away (further driving down house prices) with relative impunity. Disgusting.

    1. Forbear

      My guess is the downpayment wasn’t their savings, anyone capable of saving for a house downpayment is most likely smart enough to not pay 1.2 big for this place.

  16. PadreBrian

    1.2 mill was just stupid. I can’t believe people in 2006/2007.

    It should sell in the low 8’s.

  17. Ochomehunter

    Home values actually trippled in lots of areas from the lows from 1998 to early 2005-2006, now that we are in the worst bubble, worst credit crisis after the great depression, why cant the property values go back to 1/3 of its price plus normal inflation adjustment? Its not that people cant afford $600,000 homes, its that pool of buyers has dried out substantially, more so the lenders aren’t issuing loans so that puts more pressure.

    Someone was concerend over the news media reporting a slowdown in price reduction, I call that BS. Indovidual property prices are falling much faster. Its again that Median BS that skews the actual %age of fall. Remember, in 2006-2007, NAR was reporting small appreciation of Median in OC when actually individual home values were falling. You can safely assume that if price decling is slowing down, it simply means that expensive homes (over $600K) are selling more than less expensive ones (under $600K). Wait till we see more homes sold for the bottom end of the market, that will bring the overall median down further. We are not done yet by any means. I put a price tag of $600K or even $550K on this crappy looking elevation.

  18. tryingtobuy


    Can you please look into 111 Nighthawk. This house is on the market for $500,000 more than it should be and is in NOD. I cannot decipher the many mortgages against this property or who the actual owner is?

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