For the past year, we’ve noticed a trend when talking to builders, developers and architects for features: Many have completely bypassed the traditional production homebuilding method and have chosen to build closer to urban cores and infill areas.

It’s not breaking news that many younger buyers, as well as their older baby boomer counterparts, want to be closer to a city’s core—the core where the [supposed] jobs are, where amenities such as shopping and entertainment can be walked to, and where the reliance on automobiles is nil. Who can blame them? Wake up, walk to get coffee, then walk to your job every morning? Sign me up.

It’s not just a pipe dream, though. It’s a trend that many builders have jumped on, taken advantage of and profited from. And now there’s some hardcore evidence that’s proving our city’s urban cores are being rebuilt.

The Urban Land Institute’s (ULI) “Housing in America: The Next Decade,” references a recent EPA study that shows there has been a “striking move back to the urban core in many markets.” The study concluded that “. . . in roughly half of the metropolitan areas examined, urban core communities dramatically increased their share of new residential building permits.”

Here are some specific examples:

• In 15 regions, the central city more than doubled its share of permits.
• In the early 1990s, New York City issued 15 percent of the residential building permits in the region. During the early part of the past decade it averaged 44 percent.
• The city of Chicago saw its share of regional permits rise from 7 to 23 percent over the same period, while Portland, OR, went from 9 to 22 percent and Atlanta went from 4 to 13 percent.

The ULI concludes that the acceleration of residential construction in urban neighborhoods reflects a “fundamental shift in the real estate market” with more than one-half of all residential permits pulled from core urban suburbs in New York, Chicago and Los Angeles in 2007, the highest in decades.

And what about the suburbs—the home of the next generation of slums, says some pundits in the media—what are to become of them? So far, many have sat vacant.

According to the most recent U.S. Census data, from 2002 to 2006 there were 9.1 million units built in the country. American households grew by only 6.7 million in that time. This means that the country has an excess of about 2.4 million housing units—in the worst recession in recent memory.

What this doesn’t take into account is where these homes were constructed. Built-out exurbs that feed into Los Angeles County or the San Francisco Bay Area are struggling. High-growth regions, however, with robust employment centers are doing OK—in the context of the economy—with new homes being built and sold to growing populations. These regions include Texas, Massachusetts, New York and New Jersey.

We’ve seen successful subdivisions being built and sold. In fact, we just had a conversation with a large production homebuilder that recently emerged from bankruptcy who had a decent year selling product. They had some good advice: You can still sell houses today and make money if you know who your buyer is. You need to understand how to market to them. You need to cull the fat out of your own system, build fast and build inexpensively. You can’t build an overdesigned house based on pretty architectural photos that are three years old. Despite the cliché, it’s really all about the basics, right now.

Sure, infill will continue to explode in the urban core, yet the suburbs aren’t dead by any means. But long-gone are the days of ugly, huge stucco monstrosities—because smarter builders are actually building homes customers want, even if that means compact homes closer in to cities.

John Chilson

Editor in Chief