Hawai'i home builders last year delivered new homes at a modest pace, contributing to pressure that pushed up prices for new and used homes to record levels.

Sales and prices are expected to continue rising this year as two high-rise condos in Kaka'ako come on the market.

Developers built and sold 4,102 single-family and condominium homes statewide last year, an increase of 178 units, or 5 percent, from 3,924 units in 2004, according to a report prepared by local analyst Ricky Cassiday for Central Pacific HomeLoans.

The level of home production was higher than it has been in the past decade, but was significantly below record production at the market's last peak in 1993, and also lower than four other years in the early '90s.

The average price for new homes sold last year was $606,899, up 24 percent from $488,860 in 2004.

Cassiday projects that new-home deliveries this year will rise by about 1,160 units, or 28 percent. But he said higher costs for land and construction will present challenges for developers to build more homes, and will translate to higher sale prices.

"Unless costs of materials, including the land, come down, builders will have to work very hard to increase their levels of production," he said. "My fear is that this constraint on housing supply will pressure prices to move higher, especially at the low end."

Other housing market observers say an imbalance of supply and demand is primarily behind the big run-up in Hawai'i home prices over the past several years, and that new home construction has done relatively little to increase supply in the face of strong buyer demand.

New homes over the past 25 years represented 29 percent of all Hawai'i home sales on average, but over the past few years accounted for about 15 percent of sales as new home delivery remained relatively flat while sales of used homes dramatically increased, according to Cassiday.

Bruce Barrett, vice president of sales and marketing for Castle & Cooke Homes, said the development firm has been constrained by the availability of land that's ready for building.

"Where we've had homes to sell, sales were up," he said. "We just didn't have the product to sell."

Castle & Cooke delivered 475 homes last year, which was down from 630 a year earlier. The change included more sales in Mililani, but fewer in Waipahu and Royal Kunia where Castle & Cooke completed communities.

Barrett said Castle & Cooke anticipates a slight increase this year as sales begin to close at projects started last year in Makakilo and the Big Island.

D.R. Horton's Schuler Division became the busiest builder last year, displacing Castle & Cooke by delivering 527 homes on O'ahu, Maui and the Big Island.

Other developers that added to the state's new home supply included Stanford Carr Development (383 homes), Haseko Homes (371), Towne Development (277), Gentry Homes (276), Marshall Hung (231) and Centex Destination Properties (199), according to Cassiday's report.

Combined, new and used home sales grew 2 percent to 25,209 last year, representing $11.2 billion in transactions compared with $8.7 billion in 2004. The average price for all homes was $442,661, up 27 percent from $349,107 during the same period.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.