KB Home became a multibillion-dollar real estate company building homes in the ballooning suburbs. But when the housing market dried up in 2008, so did the company’s main line of business.

Now, for its next act, the Westwood homebuilder is making a big bet on upscale professionals buying condos, townhouses and homes in cities.

Los Angeles might be famous for its suburban sprawl, but KB has recently been loading up on land on its home turf to build higher-density urban infill projects. What’s driving this strategy? Driving.

“It’s the commute times,” said Steve Ruffner, president of KB’s Southern California division. “People are willing to give up a little bit of space and go to a denser product to get hours of their life back every day. I’ve heard that from customer after customer.”

About four years ago, KB Chief Executive Jeffrey Mezger laid out an aggressive strategy to grow the company’s business in California’s coastal cities and began picking up parcels for development, especially those with transit options.

“We wanted to be in infill locations that were close to the commuter corridors, good schools and had high income around them,” Ruffner said.

According to real estate agents, these commuter corridors have become a selling point for urban living. People in Los Angeles don’t drive everywhere because they like sitting in traffic; they drive everywhere because it’s been nearly impossible to find housing served by convenient public transit options. New transit projects, such as the light-rail Expo Line, boost demand, especially when shopping and dining is also available within walking distance.

“Near the Expo Line east of Culver City, I’m selling houses to urban professionals who would never have moved south of the 10,” said Richard Schulman, an agent with Keller Williams Realty in Westwood. “Now they’re saying, ‘I can go to Santa Monica, I can go downtown, and I don’t have to drive.’”

Focusing on more affluent areas led KB to return to Playa Vista, where it developed the Prima Terra condominium project during the master-planned community’s first phase of construction, which kicked off in 2001. The company purchased more than 50 acres in the upscale Westside neighborhood in late 2012 for $250 million and turned it into two new residential communities: Asher, featuring detached single-family homes starting at $1.4 million, and Skylar, luxury condos that start at $1.1 million. Both projects just began selling residences a few weeks ago and Ruffner said shoppers have shown a lot of interest.

“The whole strategy there was to build homes on the Westside of Los Angeles in the only master-planned community that probably will be built in our lifetimes,” he said. “It has shopping, entertainment and a park-and-not-leave type of environment.”

KB was launched as Kaufman and Broad in 1957. (Co-founder Eli Broad is No. 2 on the Business Journal’s list of Wealthiest Angelenos.) The company grew from one tract in Detroit’s suburbs to a market cap of more than $1 billion today.

But the 2008 financial crisis hit KB and other homebuilders especially hard as a wave of foreclosures drained nearly all demand for new construction for several years. The company’s stock fell to less than $6 in August 2011 from a high of $82 in summer 2005. Suburban areas, where the company had built affordable single-family homes for decades, were especially depressed.

Selling land

From 2008 to 2010, the company sold off thousands of acres of undeveloped suburban development sites to get them off its balance sheet. KB then decided to change tactics. It has invested more than $1.2 billion in land over the last 12 months with a focus on higher-end infill locations.

However, investors are yet to get behind the move. The company’s stock was trading at $16.25 a share April 23, down 10 percent year to date and still less than a fifth of its all-time high.

Will Randow, an analyst who covers KB for New York investment bank Citigroup Inc., said the company’s strategy hasn’t been enough to lift it above a sinking tide that has brought down homebuilders such as Westlake Village’s Ryland Group Inc. and Meritage Homes Corp. of Scottsdale, Ariz. Both companies are also down substantially this year due to a slowdown in new-home orders.

“Investors generally don’t dig as deeply into specific land locations,” Randow said. “They’re more focused on order pace and the margins related to those orders.”

Because KB purchased a lot of its land after the market, especially in coastal California cities, started to bounce back, its margins are not particularly exciting to investors. That hasn’t deterred the company from splashing serious cash on new upscale development sites.

KB recently closed on two land purchases in downtown San Francisco, where it plans to build luxury condos, the first time it will develop housing in that city’s limits. In September, the company bought a parcel in the South Beach neighborhood that is entitled for a 74-unit complex. It’s a $60 million project, including land costs and construction. KB also picked up a three-quarter-acre site planned for 81 condos in Lower Pacific Heights for $38 million in February; building costs of the million-dollar condos weren’t disclosed.

The company said it plans to continue scooping up urban infill sites, especially in the L.A. area, where it can build dense residential communities for the foreseeable future.

“We are tying up properties in Los Angeles County for a pipeline of these types of projects,” said Ruffner. “There’s a lot of built-out cities that we think are terrific places to live but have very old housing stock. So that’s really a focus for us, to get into those markets.”

KB is working to tie up a piece of infill land in West Covina, where it plans to build 12 detached homes per acre. The typical L.A. single-family neighborhood has about five to eight houses on every acre of land. The company is also moving forward on a site in Van Nuys, one of L.A.’s original suburbs, where it wants to put up detached townhomes.

“Higher density, whether it be detached or attached, is going to be the norm for infill, and the buyers seem to be OK with it,” Ruffner said. “In fact, they really like it.”

The numbers bear out greater demand for condos. The Case-Shiller home price index shows that since the end of 2012, L.A.-area condominium prices have been growing faster than prices of single-family homes. And condos in Los Angeles are often closer to some of the attractions of city life, such as shopping and dining.

Homebuyers are increasingly willing to ditch more space in the suburbs for more time with their families and more to do in the neighborhood. KB is more than happy to provide this dense urban living, as they can pack more housing in the same amount of real estate – and properties in desirable infill areas often command a higher price than the typical suburban home the company built its business on.

“Why go build a house in Corona to sell for $300,000 when you can build a condo in Westwood to sell for $750,000?” asked Schulman.