In line for a raze: when neighborhood lots are worth more than the houses that sit on them, Denver investors find it makes more sense to bulldoze and build anew.

• Author: Lewis, Pete
• Position: Q2 Real estate

IT'S NOT DIFFICULT TO FORECAST THE FUTURE FROM THE SECOND FLOOR OF THE house Jeff Johnston is building in University Hills. Just peer out any window, in any direction. The landscape, north of Hampden Avenue and east of Colorado Boulevard, is flat so you can see for several blocks. The neighborhood was developed in the 1950s with single-story ranch homes. The houses and yards run the gamut from immaculate to neglected to abandoned. On every sixth lot or so, a brand-new, two-story house towers above the rooftops.

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The new houses are less than a year old and three times the size of the older homes in their shadows. The wide streets bustle with pickup trucks and construction equipment. Roll-away dumpsters, porta-potties and chain-link safety fences dominate most blocks. For-sale signs seem to adorn half the lawns in the neighborhood. It's easy to envision that in a few years all the neighborhood's original homes and yards will vanish, replaced by newer, bigger models.

University Hills, like many urban neighborhoods throughout the nation, is in transition. And in today's housing market, transition often means scraping off older homes and replacing them with newer, larger homes more suited to today's consumers.

Scrape-offs are nothing new in the metro area. The trend started more than 15 years ago in Cherry Creek, then migrated to the Washington Park and Bonnie Brae neighborhoods. Today you'll find scrape-offs all over the metro area, from the most exclusive neighborhoods in Denver to established suburban communities in Lakewood, Littleton and Englewood.

Urban developers and most real estate professionals view scrape-offs as part of the natural evolution of a neighborhood and a logical response to economic and market conditions. Denver's upsurge of scrape-offs reflects two related trends: the desirability of living close to downtown, and the demands of today's homebuyers. In 1950, the average size of a new house built in the United States was 983 square feet. By 2004, the size of an average new home increased 140 percent to 2,349 square feet. Homebuyers want three- or four-car garages, industrial-sized kitchens, walk-in closets and master bedroom suites.

Suburban developers have had plenty of open space to build new homes that reflect this trend toward bigger homes. Urban developers must create open space for new, larger, more-desirable homes by demolishing obsolete properties. But the metro area has grown to a point where purchasing a big, brand-new house in the suburbs also may mean an hour commute to the office.

"A lot of this is driven by traffic," said Brooke Granville, an associate broker with Perry & Co. "People realize they can live closer to the city, in an established neighborhood with mature...