Defying expectations, the number of brand new homes sold skyrocketed in October, rising a blistering 13 percent over September’s sales.

According to the National Association of Home Builders, new home sales are on target to hit a new record of 1.4 million this year. Most economists surveyed by expected the number of new home sales to fall as mortgage interest rates rose in the third quarter of the year.

While the number of new homes sold increased dramatically, the median price rose a modest 1.6 percent to $231,300. Average prices fell about 1 percent.

Sales of existing homes didn’t fare nearly as well. In October, sales of existing homes fell 2.7 percent from September. Sales were up 3.7 percent over October, 2004.

According to David Lereah, chief economist of the National Association of Realtors, the U.S. housing market is becoming more balanced between the number of buyers and sellers.

“We are returning to more balanced markets between home buyers and sellers, one that places buyers on a more even footing. Housing activity has peaked and is coming down a bit, and we expect further cooling in the coming months. We feel confident that housing is landing softly as rates continue to rise,” Lereah said.

Most industry observers expect sales of new and existing homes to top 8.5 million in 2005.

It’s no surprise that mortgage lenders, real estate brokers and home builders are optimistic about the future. But Americans are more wary of the housing bubble. What do consumers think? Click here to read what hundreds of consumers think about today’s real estate market: Ilyce Glink’s Real Estate Bubble Survey.

Nov. 30, 2005.