Lehigh Valley home prices in the first quarter rose at less than half the rate they did a year ago, and the area fell to No. 5 in a ranking of housing markets in Pennsylvania.

Home prices in the Lehigh Valley rose 6.3 percent on average year-over-year, according to a housing index released Thursday by the Office of Federal Housing Enterprise Oversight.

The Valley ranked No. 81 for average home price increases out of 265 metropolitan markets across the country in the quarter. The Valley's housing market trailed Scranton, Harrisburg, York and Lancaster in the state.

A year ago, the Valley ranked No. 75 nationally, and was the second-hottest market in the state. Then, home prices in the Valley were up 16.4 percent year-over-year.

Nationally, home prices continued to rise in the first quarter but at the lowest rate in 10 years.

"Low interest rates and unemployment rates continue to prop up house prices in most markets," said OFHEO Chief Economist Patrick Lawler in a news release. "Prices are rising slowly in most areas, however there are some exceptions. For the first time in seven years, two states -- Massachusetts and Michigan -- experienced four-quarter price declines."

The federal statistics are based on price changes in repeat sales or refinancings of homes whose mortgages are purchased or secured by big mortgage-finance companies. It covers homes sold by real estate agents and individual homeowners.

The federal agency defines the Lehigh Valley as Carbon, Lehigh and Northampton counties and Warren County, N.J.

Home appreciation in the Valley continued to outpace average home price increases across the state and the U.S., according to the federal statistics. Home prices increased 5.5 percent on average in Pennsylvania, and 4.3 percent in the United States.

The average price of existing homes was $222,000 in April, according to statistics from the Lehigh Valley Association of Realtors, which tracks sales in Lehigh and Northampton counties. The number of homes sold has fallen for the past 11 months, while the number of homes for sale has skyrocketed, the group said.

The slowdown comes on the heels of a trio of blockbuster years for home appreciation and sales. Prices for existing homes in the Valley rose 10 percent or more each year from 2004 to 2006. Many homes sold in a matter of weeks.

In the past five years, Lehigh Valley home prices have risen a total of 67 percent, OFHEO said. Low interest rates for mortgages have brought many first-time buyers into the local housing market, while affluent newcomers fleeing high prices in New York and New Jersey have pushed up the average cost of a home in the Lehigh Valley.

For people who own a home here, the price increases have been good news. What may be their largest asset went up considerably in value over the past year. But people who want to buy their first home or trade up to a bigger house are finding that their dollars don't go as far.

The slowing pace of sales in the past year has irked some homeowners who hoped to sell their houses quickly. While rowhouses and twins in the area's three cities continue to sell briskly, many suburban homes and properties that cost $250,000 or more are sitting on the market longer.

The shift in the market has been a boon for prospective buyers. The excess housing inventory has given buyers flexibility to be choosy and gain concessions from sellers for the first time in more than a year.

At a conference last month at Lehigh University, area real estate agents said inventory continues to rise because some homeowners are trying to sell their houses while prices are still on the rise. At the same time, buyers are taking longer to purchase homes. With a large number of homes for sale, buyers don't need to rush.

"The buyers don't want to purchase in a declining market so there are a lot of buyers on the fence waiting," said Loren Keim , who owns Century 21 Keim Realty in Allentown.

Real estate agents and economists said the market for homes, nonetheless, remains relatively healthy here because the population is rising, and the job market is expanding. Many also acknowledge a slower pace of sales and moderate home appreciation create a more sustainable market, which is better in the long term.

jeanne.bonner@mcall.com

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