Contemporary fantasy
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Contemporary fantasy is a subgenre of fantasy, also known as contemporary urban fantasy, modern-day fantasy, or indigenous fantasy. These terms are used to describe stories set in the putative real world (often referred to as consensus reality) in contemporary times, in which, it is revealed, magic and magical creatures exist, either living in the interstices of our world or leaking over from alternate worlds. It thus has much in common with, and sometimes overlaps with, secret histories.
Novels in which modern characters travel into alternate worlds, and all the magical action takes place there (except for the portal required to transport them), are thus not considered contemporary fantasy.
Contemporary fantasy is also to be distinguished from horror fiction, which also often has contemporary settings. When encountering magical events and creatures, the protagonist of a horror novel is horrified, while the protagonist of a fantasy novel (contemporary or otherwise) is filled with a sense of joy and wonder. Horrifying events may happen, but the fundamental distinction is vital.
Contemporary fantasies often concern places dear to their authors, are full of local color and atmosphere, and attempt to lend a sense of magic to those places.
Charles Williams, whose 1930s novels are mostly set in London, is called the father of contemporary fantasy. More recent notable authors include Charles de Lint (who uses a disguised Ottawa, Ontario as a setting) and Tim Powers (whose novels in this subgenre are mostly set in California). Other particularly notable contemporary fantasy novels include Little, Big by John Crowley (set in an unnamed New York City and a rural area to the north), War for the Oaks by Emma Bull (set in Minneapolis, Minnesota), The Folk of the Air by Peter S. Beagle (set in a disguised Berkeley, California), and a large number of works by Mercedes Lackey. Neil Gaiman's American Gods and Neverwhere are also good examples of contemporary fantasy.
Another area where contemporary fantasy plays a large role is in Japanese anime story telling.
Superhero fantasy typically is set in contemporary times as well.