Young homeowners flocking to center of cities

You’ve probably seen the ads and read the hype: Urban living — that is to say, living large in some posh loft-style condo or townhome in a metropolitan center like downtown Los Angeles — is where it’s at. Private developers and municipalities across the country have pumped billions in recent years into the idea that new homebuyers — especially young, socially frenetic homebuyers without children — will forego the roominess of the suburbs for a more cloistered lifestyle near the center of everything.

In L.A., city officials have labored for nearly a decade at relaxing zoning and building codes in order to help developers convert dilapidated flophouses and offices into chic Habitrails for the upwardly mobile.

Such efforts have for the most part proved successful in getting the lofts and townhomes built. But how have sales fared in the face of the troubled economy? Have declining property values and tighter credit standards put the brakes on the urban movement? Or have these same market forces, combined with the reality of high gas prices, made the allure of urban living even more attractive?

Like so many things, it all depends on whose opinions you trust. According to economists like Christopher Thornberg, principal of L.A.-based Beacon Economics, the notion of high gas prices acting as a great attractor toward downtown living is just a myth.

More than gas prices and credit lines, Thornberg suggests, the determining factor for choosing to live downtown is space. “The vast majority of Americans who can afford a yard want that yard,” he says. “If they can get a yard closer to work, that’s great, but they want a yard. There’s a small, growing demographic that prefers a condo in an urban area, but it’s still very small.”

Whether because buyers have decided they can’t go without their backyard barbecues, the economic slowdown or other factors, urban properties simply aren’t moving as fast as developers and city officials had hoped.

Sales in downtown markets are down everywhere — by 15 percent in Boston, 16 percent in L.A., 50 percent in Chicago, and by more than 60 percent in Raleigh, N.C. But according to officials with the Downtown San Diego Partnership, a nonprofit group of San Diego merchants that promotes business in the city’s core, condo sales are down but far from out.

“Downtown condo sales are trending a little down from our high in 2004, but that’s getting it back to 2001 and 2002 levels, which were still fairly high,” says Todd Voorhees, vice president of public policy and communications for the group.

“Out of 69 total downtown condominium projects, 47 are totally sold out, and the other 22 are actively selling.”

A recent report by the financial analysis firm Global Insight shows the San Diego housing market among the most undervalued in the nation. Home prices have fallen about 32 percent from their peak in 2005. But, compared to L.A., Thornberg says San Diego’s potential for becoming a thriving urban residential market is stronger.

“Between the two, I would argue that downtown San Diego has a greater chance of being a great residential environment because at least you have the Gas Lamp District and you have the ocean,” he says. “L.A. has a chance of being a great environment, but it ain’t there yet.”