The failure of a boom-era townhouse and condo project in the heart of Libertyville may have seemed like bad news at the time. As things turned out, it made way for another developer to step in with a new plan where the houses will be less expensive—and better suited to the neighborhood.

In 2005, the Hummel Group of Palatine launched a development of 31 modern brownstones on a mostly vacant three-block parcel immediately east of Libertyville’s downtown. The brownstones were to be priced from $800,000 to  $855,000. The developers also planned to preserve a historical school building on the site, fitting it out with 18 condos. In the end, only one row of townhouses was ever completed; four sold at around their asking prices, and the last was discounted by about $200,000 as the $40-million project sputtered, say local real-estate sources.

Now John McLinden, a developer who lives in Libertyville, has a different plan for the site, one that builds on the look of the existing housing in the surrounding blocks. It’s a New Urbanist development, emphasizing homes within walking distance of shopping and a commuter train line. One aesthetic key to McLinden’s proposal is that every house will have a big front porch. Another key: the homes will be priced at $503,500. (One smaller home will be $496,000.)

McLinden won’t disclose what he is paying the foreclosing lender, Libertyville Bank & Trust, for the land and the old school building. (He won’t close on the purchase of the land until late this summer, so the sale price isn’t available yet in public records.) “It’s a price that makes it possible for us to sell the houses at hundreds of thousands less than the brownstones were going to be,” he says. The Hummel Group had paid about $3.6 million for the property in 2005.

In its first eight weeks on the market, SchoolStreet, as the project is called, has landed seven sales. That’s more sales than the brownstone project achieved, and more than McLinden and his partners had forecast they would sell in 18 months. “In better times, selling seven of these in eight weeks, a developer would be thrilled,” McLinden says. “To do that in this market, we’re better than thrilled.” Debbie Paoli at Century 21 Kreuser & Seiler is handling sales.

“You cannot find a brand new house at that price in Libertyville,” says Kristin Dean, who owns the town’s Serendipity Shop and who is among the first buyers in the McLinden project. She and her three kids will move in to one of the houses after it’s completed in mid-2011. “The price is awesome,” she says, “but it’s not so much the house as the feeling—the community.”

While New Urbanism has been tried in countless settings—and is most closely associated with Seaside, Florida— McLinden suggests that Libertyville is an ideal place to apply its concepts. It’s already a model of “Old Urbanism”: a town with a vibrant core, pretty housing beneath big trees, and a good link to downtown Chicago via Metra. “Every developer talks about ‘lifestyle,’ and then they have to go into the Disney machine and create something to support that word,” McLinden says. “But here? Guess what? The history and the lifestyle already exist. It’s authentic, and we’re coming in next door to it.”