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

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.

🙂

Shady Canyon is a unique neighborhood of high quality homes and great amenities. Will the prices hold up there?

Asking Price: $3,895,000

Address: 58 Vernal Spg Irvine, CA 92603

You’re beautiful. You’re beautiful.
You’re beautiful, it’s true.
I saw your face in a crowded place,
And I don’t know what to do,
‘Cause I’ll never be with you.

You’re Beautiful — James Blunt

I am careful in my life not to take on limiting beliefs, but realistically, I will never own a house with a $3,895,000 price tag (hyperinflation?). I don’t know that I would want to. My family does not need 5,385 SF… I suppose that is why it is called luxury.

This is a beautiful property as many in Shady Canyon are. It is the only place in Irvine where you can obtain lots and houses of this size, which makes it unique; although, North Tustin has some comparable properties nearby. If you want big and opulent in Irvine, Shady Canyon is the place to do it (Turtle Rock has some big lots too).

I recently wrote about Rental Parity and Beyond where I discussed the value beyond cashflow value that real estate can sustain. In that post, I noted, “There are only two things that creates the capacity to hold wealth
beyond cashflow value in real estate; uniqueness and quality.” The properties in Shady Canyon all have uniqueness, and depending on the taste and budget of the owner who improved the property, many Shady Canyon properties are of very high quality. Therefore, Shady Canyon may sustain valuations above rental parity even at the bottom of the market. That is the good news.

Unfortunately, properties in Shady Canyon got bid up to unreasonable levels due to the Immunity Syndrome. Shady Canyon is still due for a significant fall.

CHUNG YOON ART GALLERY — chungy0@yahoo.com

Asking Price: $3,895,000

Income Requirement: $973,750

Downpayment Needed: $779,000

Purchase Price: $4,266,000

Purchase Date: 11/22/2005

Address: 58 Vernal Spg Irvine, CA 92603

Seller
upgraded throughout as her dream home and spared no expense but never
moved in. That is sad, if true.

Seller would
consider a lease option, rent $13,500/mo. Let’s say this trades at a small premium to current rental parity; with a GRM of 200, this property would be worth $2,700,000. Is that where this finds support? Is this property of such high quality and unique that it may store value significantly above cashflow value?

This property is in no danger of being a short sale, but the owner does have a significant mortgage on the property. Sometimes I see a $1,000,000 loan on the property because some foolish financial planner convinced the owner not to have all their money tied up in the house. It tends to be limited to $1,000,000 because there is no deduction for larger amounts. The mortgage on this property is much larger.

If this property sells for its asking price, and if a 6% commission is paid (5% is the norm on such expensive properties), then the total loss of equity will be $604,700. That is a big loss, but selling now may be much less painful than waiting if this bottoms near $2,700,000.

BTW, This parody is better than the real video…