WASHINGTON -- U.S. sales of new homes rose in March to a seasonally adjusted annual rate of 417,000. The increase added to evidence of a sustained housing recovery at the start of the spring buying season.

The Commerce Department said Tuesday that sales of new homes increased 1.5 percent. The gain brought the level higher than February's pace of 411,000, though below January's 445,000 -- the fastest pace since July 2008.

New-home sales are still below the 700,000 pace considered healthy by most economists. But the pace has increased 18.5 percent from 352,000 a year ago.

Most economists see more gains ahead, as housing is likely to remain a consistent driver of economic growth this year.

"With increasing signs of a softer U.S. economy springing up in the spring, we can take comfort in the resilience of the housing recovery," said Jennifer Lee, senior economist at BMO Capital Markets.

Steady job creation and near-record-low mortgage rates are spurring more Americans to buy houses.

The rise in demand is helping to boost sales and prices in most markets.

Higher prices tend to make homeowners feel wealthier and encourage more spending.

A limited supply of both new and previously occupied homes has also helped boost prices.

The inventory of new homes for sale increased 2 percent in March to a 153,000, the second straight gain.


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Still, that's the equivalent of a 4.4-month supply at the current sales pace and historically lean, according to Jim O'Sullivan, chief U.S. economist at High Frequency Economics.

The median price of a new home rose to $247,000 in March. That's 3 percent higher than a year ago.