Sales of new U.S. single-family homes increased more than expected in March as sales in the West surged to their highest level in more than 11 years.

The Commerce Department said on Tuesday new home sales increased 4.0 percent to a seasonally adjusted annual rate of 694,000 units last month. February's sales pace was revised up to 667,000 units from the previously reported 618,000 units.

Data for January was also revised to show sales unchanged instead of declining. Economists polled by Reuters had forecast new home sales, which account for 11 percent of housing market sales, rising 1.9 percent to a pace of 630,000 units last month.

New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They jumped 8.8 percent from a year ago.

March's surge in new home sales and upward revisions to January and February sales data will probably not change economists' expectations that residential investment declined in the first quarter. The housing market is struggling with a chronic shortage of properties that is boosting home prices and weighing on sales at the lower end of the market.

Rising mortgage rates and moderate wage growth are also making home purchasing less affordable, especially for first-time buyers who account for less than a third of transactions.

Sales in the West soared 28.3 percent to their highest level since December 2006. Sales rose 0.8 percent in the South, which accounts for the bulk of new home sales. They plunged 54.8 percent in the Northeast and dropped 2.4 percent in the Midwest.

The median new house price increased 4.8 percent to $337,200 in March from a year ago. Last month, there were 301,000 new homes on the market, unchanged from February.

At March's sales pace it would take 5.2 months to clear the supply of houses on the market, down from 5.4 months in February. About two-thirds of the houses sold last month were either under construction or yet to be built.