Permit values for new-home construction in the Spokane area have taken a considerable leap this year, indicating a growing number of homebuyers here are looking to move into more custom quarters, some industry observers say.

The average construction value for new single-family home permits issued in unincorporated Spokane County and the cities of Spokane and Spokane Valley was $289,534 through the first nine months of the year, up from $196,132 in the year-earlier period, according to building permit activity reports issued by the jurisdictions. A total of 542 building permits were issued for new homes in the three jurisdictions in the first nine months of this year, up slightly from 530 permits issued in the year-earlier period.

Tim Lewis, owner of Lewis Construction & Development Inc., of Spokane, says he's seeing a growing demand for new homes for empty nesters who want to downsize while still upgrading certain amenities.

"They are looking for single or two-level homes, and they are driven by long-term accessibility and energy efficiency," he says. "One of our specialties is aging-in-place design."

Three homes Lewis Construction is designing and building in the $225,000 to $350,000 price range are for clients in the empty-nester category, he says.

Lewis declines to disclose the number of homes Lewis Construction has built in recent years, but says in terms of revenue, "This is our busiest year yet."

He predicts the new-home market will continue to improve.

"A ton of people are talking and saying they are going to build in the spring," he says. "Hopefully 2013 will bring a double digit increase in revenue."

Phil Folyer, owner of Morse Western Homes LLC, of Liberty Lake, and president of the Spokane Home Builders Association, says he's hopeful that with existing home sales picking up, people will be thinking about moving up into the $350,000-plus range, which currently has a limited market.

"There are still homes selling for over $400,000," Folyer says. "It's just that if you're going to be at that price point, you're going to have to build a beautiful home for a good price. Buyers out there are just looking for good deals."

Folyer says he's built two homes on speculation in each of the last two years. This year's homes were listed at more than $400,000 in the SHBA Fall Festival of Homes.

"I talked to more qualified or interested buyers than I have in a couple of years," he says of the festival showing. "That's encouraging."

The total single-family residential market, including existing home sales, is starting to rebound, says Rob Higgins, executive vice president of the Spokane Association of Realtors.

"It's improving from pretty low numbers," he says, "but it's heading in the right direction."

For the total Spokane County market including existing home sales, the median home sales price through October, was $159,900, up from $155,000 a year earlier, according to the Spokane Association of Realtors' Multiple Listing Service.

First-time homebuyers generally are looking for homes priced at or below the median level, which doesn't include many new homes, Higgins says.

"The entry-level market is in resale," he says. "The tough part over the last five years has been to build up equity. We're starting to see that now and hope it accelerates over the next few years."

The total number of homes sold here through the MLS through October, was 3,783, up 12 percent from a year earlier. Of those, 399 were new homes, a slight dip from last year, but the median price for new homes sold through the MLS in the first 10 months of 2012 was $217,312, a 6.6 percent increase from the year-earlier period, Higgins says.

"Were starting to see some movement, and that could be attributed to the low interest rates, which allow people to buy more house," he says.

Higher-end home sales, though, often aren't reflected in the MLS data, Higgins says.

"Spec housing isn't what it used to be," he says. "Most higher-end homes are custom built with buyers already lined up."

John Johnson, a manager at Victory Homes Construction, of Post Falls, says homes in the higher end of the builder's price range are selling more quickly than those at the lower end.

Victory Homes, builds homes priced from $130,000 to $330,000 in North Idaho and Eastern Washington, Johnson says.

"We don't create the market," he says. "I think fewer people are qualifying for homes in the (lower) price range. Homebuyers in the move-up market don't have as much of a problem getting bank loans."

Johnson says 2012 has been an up year for Victory homes, both in the number and average value of building permits it has obtained compared with last year.

"We're building about 25 percent more (homes)," he says, adding, "We're still capable of handling a considerable increase."

Lewis says he expects that new home costs will continue to climb if only due to recent and anticipated inflation in building-material costs.

"We're definitely going to see prices go up, because we have massive inflation coming," he says. Suppliers are warning that percentage increase in prices for drywall and concrete alone will be in the range of 10 to 30 percent, he says.

"When construction first tanked, there was a surplus of materials and prices came down," Lewis says. Now, there's a shortage of certain building supplies, he says.

Lewis Construction entered the lowest priced home in the SHBA's Fall Festival of Homes at $164,900.

"I'm building some spec homes in the lower price point, because I'm a development partner in two neighborhoods," Lewis says.

The company's bread and butter, though, is in custom homes that it designs, he says.