Living in a neighborhood called Mount Washington,

Albert Elovitz,

a 71-year-old retail entrepreneur, had stunning views of the Pittsburgh skyline. In time, however, Mr. Elovitz realized that he wanted to be a part of the revitalized downtown—not watching it from afar.

Slideshow: Steel City Sights

Retail owner Albert Elovitz traded his home in Mount Washington in the city’s southern area for a 1,750-square-foot, roughly $1 million condo at the Residences.
Billy Delfs for The Wall Street Journal

So in 2011, he spent about $1 million on a 1,750-square-foot condo in the Residences at Three PNC Plaza, where he has floor-to-ceiling windows that look out on high-rises around him. Now he walks to work. “If you’re up high enough, the view is unforgettable,” says Mr. Elovitz, the founder of local retailer Albert’s Gifts.

He is one of the lucky ones. The Steel City’s shift from a manufacturing base to well-paying jobs in education, medicine and technology over the past decade has created a shortage of luxury homes. A few upscale condo developments are in the works, but they tend to be smaller projects. That leaves many affluent buyers with two options: build or a gut-renovate a home, or move out to the suburbs.

“Inventory for the high end is pretty limited,” says

Helen Hanna Casey,

president of Howard Hanna Real Estate Services, based in Pittsburgh. “We would do anything for three-bedroom condos in any price range.”

The Residences, where Mr. Elovitz lives, was the city’s first luxury residential development in more than 20 years when it was completed in 2009. The 28 condos sold out, and today there are just two units listed for sale—and the building has less inventory because some units have been combined.

Thomas Tull,

44, chief executive of Legendary Pictures and a part-owner of the Pittsburgh Steelers, started cobbling together a luxury home at the Residences two years ago. He has purchased 13,000 square feet in the building, including a seven-bedroom penthouse and another condo for a total of $7.9 million, minus renovations.

The building also is home to the Fairmont Hotel, which allows residents access to its amenities, including the concierge and room service, and is a short walk to downtown restaurants and museums.

These culinary and cultural attractions help lure the city’s newest residents—average age 33—from across the country. Three years ago,

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and other tech businesses moved into offices in Bakery Square, a 6-acre redevelopment in the city’s East End near Carnegie Mellon. Last year, the Great Allegheny Passage, a biking trail that starts in the city and ends in Cumberland, Md., officially opened.

The city “has an intimate feel to it,” says Mr. Tull, the Los Angeles-based movie executive who sits on the board of trustees at Carnegie Mellon University and spends several months a year in Pittsburgh.

Developers Chuck and

Kristen Hammel

are renovating an old warehouse in Pittsburgh’s Strip District that Mr. Hammel originally used for his trucking company. When renovations are finished next year, the building will have 11 luxury condos ranging from 3,410 to 5,380 square feet, with prices starting at $1.2 million. Mr. Hammel is betting on demand from older, established buyers like Mr. Elovitz and those relocating from other cities.

“We’re putting in a product that doesn’t exist,” says Mr. Hammel.

Other home buyers are tackling the aging inventory. After accepting a job as associate professor of plastic surgery at the University of Pittsburgh Medical Center, the city’s largest employer,

Jeffrey Gusenoff

said it took almost five months to find a home because few luxury properties were available—and all of them needed extensive renovations.

Dr. Gusenoff, 37, and his wife, Beth, ended up buying a five-bedroom, 4,500-square-foot house built in the 1920s in Pittsburgh’s Shadyside neighborhood. They ripped up carpets and refinished wood floors in the bedrooms. In the kitchen, they tore out “leopardlike” wallpaper and installed track lighting.

“It looks 1,000 times better,” he says of the home, which he bought for $975,000, according to public records. The house still has what locals call “the Pittsburgh toilet.” Located in the basement, the fixture is a remnant of what typically were wall-less, makeshift bathrooms containing only toilet, drain and shower head. At one time, steelworkers and miners used such facilities to wash off industrial grime before going upstairs.

Like Shadyside, Squirrel Hill, also on the East End, is popular for renovations because of its vintage housing stock and large plots of land.

Hannah Arnold,

39, who returned to Pittsburgh after 20 years in New York, bought a home there with her husband,

Steven Alschuler.

The house cost $260,000, and they spent far more than that, she says, on a gut rehab. While some of the original details, such as the stained-glass windows, were kept intact, the home now features herringbone wood floors, a “man cave” with a pool table, and a large gourmet kitchen.

“The structure of the home was quality work,” says Ms. Arnold, a public-relations executive and interior designer.

Other traditional working-class neighborhoods, such as Lawrenceville and South Side Flats, are seeing new construction on narrow lots. After relocating from Austin, Texas, Jeff and

Erin Catalina

chose an empty lot in South Side Flats. Drawn to the pedestrian-friendly neighborhood and nearby East Carson Street, known for funky bars set in Victorian buildings, the Catalinas wanted a modern home and found it cheaper to build.

“These are not all matching houses or same kinds of people,” says Ms. Catalina, 36, who owns two local restaurants—Verde Mexican Kitchen Cantina and Tender Bar Kitchen—with her husband. Their four-level, three-bedroom home cost $800,000 to build; it has a custom wine cellar, a roof deck and an elevator.

In a city where most homes cost less than $300,000, resale values are a concern, says

Andrew Moss,

of mossArchitects in Pittsburgh, who worked with the Catalinas. “You don’t want to create a home that you are not going to be able to sell,” he says. “In Pittsburgh, it’s a challenge.

Write to Alina Dizik at alina.dizik@wsj.com