The Commerce Department said on Wednesday (Mar 23) home sales rose 2.0 per cent to a seasonally-adjusted annual rate of 512,000 units.

A "Sold" sign sits in front of the foundation of a house under construction in Plano. "New and existing home inventories are very lean, that can hurt sales", said Ryan Sweet, senior economist at Moody's Analytics in Westchester, Pennsylvania.

With housing stock improving, the pace of price appreciation for new homes is slowing.

The housing market is expected to make gains this year amid low mortgage rates and strong job growth.

Low mortgage rates and a labor market that's added nearly a quarter of a million workers a month on average over the last two years is giving Americans the confidence and means to buy a home. The consensus estimate from a survey of economists expected a rate of around 510,000.

Still, the market has yet to fully rebound from the housing crisis of almost a decade ago.

The report also said the median price of new houses sold in February was $301,400, up 6.2 percent from $283,900 in January and up 2.6 percent from $293,900 a year ago. The January rate was revised upward by 8,000.

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New-home sales fell sharply in the Northeast and Midwest last month, declined modestly in the South, and climbed sharply in the West.

Economists and realtors are expecting a solid spring selling season, but caution that the persistent shortage of homes on the market will limit options for buyers and push up prices.

Despite the steep monthly decline, the report noted that existing home sales were up by 2.2 percent compared to the same month a year ago.

Shares in D.R. Horton Inc, the largest USA homebuilder, fell 1.4 percent and rival Lennar Corp slipped 0.8 percent.

The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday stayed at 58 in March for the second straight month.

Builders' view of current sales conditions held steady, while a measure of traffic by prospective buyers increased.