A new study issued this month by the Urban Land Institute confirms what many of us living in California already know -- sprawl has had its heyday, and more and more people are choosing to live closer to where they work and play. The study finds that Generations X and Y -- which will dominate market demand in the coming decades -- don't want to live in far flung housing developments that require a car and long commutes to work, school or to run errands.

By comparing 2010 supply of different housing types to 2035 projected demand in Calfiornia's four largest regions -- Sacramento, the Bay Area, Southern California, which includes Los Angeles, and San Diego -- the report makes some stunning observations about the direction future growth should take to help the housing market recover.

The two bottom line findings that every journalist, planner, economist, homebuilder, developer and financier should be aware of are as follows:

First, the existing supply -- that's right, today's stock -- of conventional lot (less than 1/8th of an acre) single-family detached homes exceeds the projected demand for these homes in 2035. This finding is of such consequence that it merits a pause and repeat: California's largest regions – Sacramento, the Bay Area, Southern California and San Diego -- already have more large lot, single family homes than will be needed in 2035. Thus, expanding the supply of this housing type would be in excess of both current and projected demand, and could hurt the chances for a housing market recovery.

So if people don't want to live in these homes, where do they want to live? That leads me to the report's second key finding. In short, the answer is, near transit.

The projected 2035 demand for homes near transit is so strong that even if we put all new homes for the next 23 years near transit, we still won't meet the demand. That is, 2035 demand for homes near transit exceeds today's supply plus all of the increment of growth over the next 23 years.

This report is mutually reinforcing a survey of Southern California voters NRDC conducted recently, which found overwhelming support for transit as well as for homes in walkable neighborhoods near jobs and amenities.

So why does this report matter? In short -- timeliness. Right now, under SB 375, California's four largest regions are analyzing and adopting plans to shape their regions and accommodate growth through 2035 through the creation of their Sustainable Communities Strategies. In a fortunate convergence of market trends and policy goals, the report finds a "directional alignment between the real estate preferences expressed by consumers and the greenhouse gas reduction objectives expressed by the state of California in the form of Senate Bill 375."