From The Morning Call -- November 30, 2005 New home sales set record Industry on pace for fifth new annual high. In Valley, prices rose. Staff and wire services New home sales unexpectedly rose to a record last month, suggesting people bought houses in anticipation of even higher mortgage rates in coming months, a government report showed Tuesday. Purchases increased 13 percent, the biggest rise since April 1993, to a 1.424 million annual rate from September's pace, the Department of Commerce said. Economists forecast sales to decline to a 1.2 million rate. The increase keeps the industry on pace for a fifth record year. The number of homes for sale increased to an all-time high last month. Economists and industry analysts forecast sales to wane next year as rising borrowing costs make it more expensive to buy houses. The average price of a new home nationally was $286,500, unchanged from the same period a year ago. In the Lehigh Valley, the average price of a new four-bedroom home rose 22 percent in October to $406,000, compared to the same period last year. The local new-home statistic captures a particular slice of the Lehigh Valley housing market. Unlike the national figures, the Lehigh Valley average does not reflect all new homes built. Instead, it refers to an undisclosed number of newly built homes with four bedrooms and two and a half bathrooms sold by real estate agents. Officials say that type of home is typical for this area. October was the fourth month this year that new home prices topped $400,000 in the Lehigh Valley. New home sales make up about 15 percent of total sales in the United States. Existing homes, or resales, account for the rest of home sales. Like existing home sales, new construction in the Lehigh Valley has been given a boost by the influx of buyers from New York and New Jersey, where the cost of living is much higher. At the end of 2004, the average price of a new home in the Valley was $374,000, an increase of more than 19 percent from December 2003. The price of newly-built homes has fluctuated widely in the Lehigh Valley this year. In May, the average price spiked to $416,000, breaking the $400,000 mark for the first time, according to the Lehigh Valley Association of Realtors. In June, the average price dropped to $374,000, and then soared to $452,000 in July, according to the association. Unlike existing homes, homes under construction face variables in terms of cost and availability of materials, and the price of land and development, said Chuck Hamilton, executive officer of the Lehigh Valley Builders Association. Those factors can be quite volatile, he said, and can have a large impact on the cost of new homes. The momentum in local housing permits -- a key indicator of home construction -- has picked up considerably in the past two months. The number of new permits rose 22 percent, to 376, in October for the four-county region included in the Lehigh Valley metropolitan statistical area. Nationally, through October, 1.1 million new homes have been sold. Last year a record 1.2 million were purchased, the data released Tuesday showed. "We do not see a lot of weakness," Donald Tomnitz, chief executive officer of D.R. Horton Inc., said on a Nov. 16 conference call. D.R. Horton, the largest U.S. home builder, said earnings soared 16 percent in its fiscal fourth quarter. The company's backlog of houses ordered and not yet delivered rose 12 percent, and orders were up 26 percent from a year earlier. Still, "I'm not sure we're going to have as much pricing power in the next year as we have had in the past year," Tomnitz said. Some home builders are signaling that growth is waning. The National Association of Home Builders/Wells Fargo index of builder confidence slid this month to the lowest level in a year and a half. Toll Brothers Inc., the largest builder of luxury homes, said Nov. 8 that sales next year would be lower than it had forecast earlier because of "some softening of demand" and delays in opening new communities. The average rate on a 30-year fixed mortgage was 6.07 percent last month, up from 5.77 percent in September, according to Freddie Mac, the No. 2 U.S. mortgage buyer. Last week, the 30- year rate was 6.28 percent. Morning Call reporter Jeanne Bonner and Bloomberg News contributed to this story. Copyright © 2005, The Morning Call