There has been plenty of discussion on the issue of the fundamentals of why housing prices in Orange County are indeed, not rational. One of the most common metrics cited by those with or without a basic economics background is the rent versus buy ‘price’ (monthly payment). These prices are the net output of a large number of variables, including (very importantly) what amount can be mortgaged, as IrvineRenter has explained in previous posts. I would like to take an opportunity to focus on the supply side of the equation, to help frame the discussions. Some of this is for statistical consideration, and some is simply to discuss the housing product and this blog community’s view of the current and future marketplace offerings.
One of the commonly-recited phrases heard in defense of high housing prices, especially in Orange County, is “they aren’t making any more land.” There are a number of technical arguments to refute the idea that (even if true) this justifies high levels of appreciation, which is not the point of this post. While Irvine is extremely desirable, it is far from built out, and it appears to this blogger that there is significant rental and new home inventory available and coming available even as sales continue their sluggish pace.
One area of particular interest is Orchard Hills in Irvine. As has been discussed on the forums, this area has attracted plenty of interest for those hoping for something less remote than Portola Springs and more scenic than Woodbury or the Villages of Columbus. Any hopes for something reasonably affordable in a nice location have been dashed by the recent market survey postcard showing prices starting at $1.25 million and going up from there. It would appear that The Irvine Company is attempting to take the Turtle Rock experience and move things even further upmarket.
Fewer than 4,400 homes are planned – reduced from the 5,903 in the existing General Plan for the city of Irvine, and dramatically fewer than the 11,800 units in Irvine’s original General Plan. This will allow for 3 units per acre – fewer homes per acre than Irvine’s original hillside village, Turtle Rock.
While these lower densities sound desirable, this is obviously coming at a price.
The area is large, and I have a preview of construction that has begun at the southwest corner near Jamboree and the 261. Some pictures from Sunday walks show the state of progress.
The new retail center, scheduled to open this summer.
Closeup of the Orchard Hills brickwork style at the retail center. This same rustic-looking brick is seen on the grand entrance walls in the residential areas.
Culver and Settlers, from the hill, looking west.
Settler’s multiple lanes of gated entrance off of Culver, with the Irvine/Costa Mesa skyline in the distance.
Trees ready for planting along Settlers, looking east
IAC apartments on Whispering Trail, looking west from near the retail center
View of the apartments looking east, near the 261 toll road, with the privacy wall in progess for the homes up the hill. There is approximately 30 feet of elevation change down to the street level of the apartments.
Is the market ready for Orchard Hills?
Frankly, I’m a bit skeptical that more premium apartments and premium homes are what this market is looking for right now, and I foresee a bit of a miscalculation (or at least mis-timing) on the part of The Irvine Company. But TIC is well known for savvy market research and planning, so it will be interesting to watch unfold.
Regarding the apartments, we know that certain specific apartments at Woodbury Lane have yet to see their first rental, despite being available for over 10 months. If one checks the inventory at the newly-opened Portola Place, unit after unit has multiple available “now,” status which indicates plenty of supply. I don’t yet know the exact number of units they are building at Orchard Hills, but to my eye the number appears large compared to nearby communities such as Estancia, Anacapa, and Somerset.
Regarding the homes, we keep hearing reports about how the upper end of Orange County’s housing market is holding up well, perhaps because the folks with all the millions are not subprime borrowers. But the housing food chain cannot be deprived of its plankton forever without impacting the big tuna. Given the challenges the homebuilders are having at the Villages of Columbus and Portola Springs, the continuing trend of increasing inventory and decreasing sales in the resale market could make for a rocky ride ahead.