Downtown Los Angeles has seen a much-heralded revival in the last few years, with thousands of people moving in and a flock of new restaurants and upscale stores opening to serve them. Attractions such as Staples Center and the Nokia Theatre are helping support premium eateries and a lively club scene.


But there are signs that downtown's residential boom is slowing, if not stalling out altogether.

Prices of condominiums, which dominate the downtown market, have fallen more sharply here than in Los Angeles and Orange counties overall, according to DataQuick Information Systems. More than one-third of the residential projects approved by city officials have been sidelined.

Downtown's defenders say the area simply is suffering from the same housing slump that has slowed sales to a crawl and depressed prices across the country.

But some real estate analysts believe downtown's housing troubles run deeper. They say developers and planners miscalculated its appeal as a residential community, leading them to build far too many projects for the demand.

As a result, the housing market downtown could fall more sharply and take longer to recover than it might in established residential areas.

"There was great hype," said Fred Sands, a veteran real estate broker who sold his namesake firm and now invests in commercial properties. "There was sort of a mania that fed on itself. People said downtown was the future, and young people bought into it. Some of those buildings should not have been built."

Downtown developers counter that argument, saying there are too many people working downtown and not enough places for them to live. Traffic gets worse every year, they point out, which will drive up demand for housing closer to where people work.

"I think it is absolutely inevitable more and more people will live in downtown-type locations," saidJames A. Osterling, a developer and the former chief financial officer of Shea Homes. "I don't think [the real estate slump] is going to kill off downtown."

Home sales data, however, suggest that the downtown market is faring worse than the region overall.

The median sales price for homes sold downtown, almost all of which are condos, fell to $497,360 for the fourth quarter of last year, 16% below the peak reached in early 2007, according to DataQuick.

By comparison, condo prices fell 7% from their peak in Los Angeles County during the same period and 11% from their peak in Orange County, DataQuick said. The median sales price for condos in both counties in the fourth quarter of 2007 was $410,000.

Downtown's residential expansion began in 1999, when the city relaxed parking, zoning and seismic safety rules, making it easier for developers to convert aged office buildings into apartments. The wide-open layouts and spare look of the lofts, with concrete floors and exposed pipes, quickly proved popular with an adventuresome crowd.

Within a few years, developers began to offer units in the rehabbed buildings for sale, and luxury buildings were constructed from the ground up, with rooftop pools and sky-high prices.

So far, however, demand has not kept pace with ambitions, as several downtown boosters concede.

Developers of nearly completed condominium buildings have been pulling out all the stops to move their units. Until recently, one complex offered to lease a Mini Cooper car for buyers. It has now upped the ante: $60,000 in upgrades and discounts. Another developer was giving away paid vacations at a Mexican resort to loft purchasers.

Despite declining values, many downtown lofts are still listed for sale at more than $600,000, comparable to houses in easy commuting distance to downtown.

Osterling, who is developing a residential project in Chinatown, is well aware of the challenge. Though he calls himself "a huge believer in the renaissance in downtown Los Angeles," he likes his Altadena house just fine.

If he did downsize, "I'd probably get a condo in Pasadena," he said. "It has the theater, restaurants and culture without the rough edges of downtown."