RALEIGH - One of downtown Raleigh's scruffiest entrances would get a $12 million makeover from a townhouse project that's in the early planning stages.

City Space Investment Group wants to replace 20 shotgun-style houses it has purchased along a one-block section of South Saunders Street between Cabarrus and Lenoir streets with 42 townhouses.

Further north, the development group plans a second, more expensive project: Hinsdale Row, with 28 townhouse-style condominiums at Peace and Hinsdale streets and Glenwood Avenue. That site is occupied by the Peace Street vehicle inspection station, eight other apartment buildings and duplexes.

But both projects come amid one of the worst national housing slumps in decades. Though the Triangle has fared relatively well, January home sales in the region were off nearly 30 percent.

Developers remain bullish on housing as part of larger efforts to revitalize downtown Raleigh. But the fervor is cooling.

Last year, 117 units were sold in the center city, down 8 percent from 2006, according to the Downtown Raleigh Alliance.

With an additional 690 units under construction and almost 900 more on the drawing board, three developers have downsized projects or put them on hold. Crosland of Charlotte abandoned sales at 712 Tucker Street and is offering the 179 units off Boylan Avenue to renters instead.

City Space developers hope to attract buyers with townhouses that have street-level entrances, rooftop terraces and parking in the rear of each unit. They said the townhouses and condos will offer downtown living for residents who don't want to be right next to bars and restaurants in the Glenwood South entertainment district several blocks away.

"When you're done trolling for girls at the bars but don't want to move to the suburbs, this is the place," said Richard Johnson, a City Space partner.

Bordering historic Boylan Heights, the 1.5-acre Saunders Street site is near N.C. State University, Pullen Park and the downtown cultural center that has Memorial Auditorium and other theaters.

Overlooked area

Despite its location downtown, the Saunders Street area has largely been passed over by redevelopment that has added homes, nightspots and restaurants in other parts of downtown.

In 2001, a partnership announced plans for a 62-unit condo project, the Metropolitan on South Harrington Street two blocks away. But the $20 million project was put on hold as the economy slowed.

Johnson, who developed an eight-unit condo project on Cabarrus Street in 2006, began buying Saunders Street homes more than a year ago after being approached by Boylan Heights residents fed up with police sirens and reports of prostitution, drugs, petty theft and public drunkenness.

The project is in the early stages, but Johnson outlined plans to Boylan Heights residents Tuesday night. Homes would range from 1,200 square feet to 1,800 square feet and cost $225,000 to $315,000.

Jimmy Creech, past president of the Boylan Heights Association, said the project would boost nearby home values and neighbors' quality of life.

"We're in walking distance [of downtown], but the area ... is not a desirable area to walk through," Creech said. "This will encourage people to walk downtown.

"We'll have crime as long as nothing is done. Somebody has to get it started, and what ... this project does is open the door for others to see this is a good investment," Creech said.

Both projects require city approval. Site plans must be submitted, and construction isn't expected before late this year.

Council member Thomas Crowder said Wednesday that the Saunders Street area needs improvement, and residents attracted by new townhouses could spur retail development nearby.

"We obviously need to help revitalize that area," Crowder said. But "the whole area has to come up to support retail."

Johnson is developing the Saunders Street project with partner John Taylor. The partnership planning Hinsdale Row has separate investors, including Cary developer Craig Davis.

Units in that $22 million project will be 2 1/2 to 3 1/2 stories high and range from 2,000 to 3,700 square feet. Prices will be $600,000 to $1.1 million.

Ann-Cabell Baum Andersen, owner of the Glenwood Agency, said there is still demand for downtown homes. Her agency is handling sales at the West, which is several blocks north of the Saunders Street site, where half of the 170 condos are under contract.

Developers "aren't canceling because buyers aren't buying, it's because ... [they] can't find financing," Andersen said. Her agency this week sold a one-bedroom condo in Governors Square after receiving two offers for more than the $139,000 listing price.

"We've got buyers," Andersen said, "and we can't find them anything."