The strong momentum in new home sales was also driven by a sharp increase in sales in the Northeast. And overall, new home sales are trending higher as buyers have few options for previous homes.

The US Commerce Department reported on Tuesday that US new home sales rose 9.6 per cent in March to an annual rate of 683,000 units, compared with a revised 623,000 units in the previous month. This is the highest level since last year.

The figure is seasonally adjusted and refers to how many homes would have been built over the course of a full year if builders had continued to build at the same rate each month.

The jump was better than economists on Wall Street had expected. They had predicted new home sales would fall to 634,000 units in March.

The February figure was revised sharply. new home sales fell to a revised 623,000 units in February, compared to an initial estimate of a 1.1% increase to 640,000 units.

New home sales figures fluctuate on a monthly basis and are often revised.

The median sales price of new homes sold in March was $449,800.

The supply of new homes for sale fell by 9.5% between February and March, equivalent to a 9-month supply.

Regionally, the Northeast led the way in new home sales by 171%. Only the southern region saw a decline in new home sales.

Leaving aside the fact that new home sales can be very volatile - sales in the North East fell sharply in February and this was reversed in March - builders saw strong overall demand from homebuyers.

Buyers continue to find the housing market challenging with a low number of listings, especially for previously owned homes. Many buyers turned to new construction homes as home sellers held on to ultra-low mortgages.

Builders continue to offer a variety of incentives, from buyouts to paying buyers' closing costs, to boost demand.

What are they saying?" The main picture is that the trend in new home sales has improved despite high mortgage rates," Neil Dutta, head of economics at Renaissance Macro Research, wrote in a note.

"New home sales represent signed contracts and are therefore considered a leading indicator of activity," he added.

Lisa Sturtevant, chief economist at Bright MLS, said in a statement that about a third of the homes for sale on the market are new construction, which is higher than the one-tenth of a percent in a more typical housing market.

She added that even though there is choice in the new home sales sector, "it's not necessarily a boon for first-time buyers" because new homes are already 10-15 per cent more expensive than existing homes.

Stocks of builders, including D.R. Horton, Inc., Lennar Corp., PulteGroup Inc. and Toll Brothers Inc. were mixed in morning trading. Homebuilders exchange-traded funds were lower.