In this Monday, Feb. 27, 2017, photo, real estate signs mark the lots near one of the new homes for sale in a development for new homes in Cranberry Township, Butler County, Pa. U.S. sales of new homes shot up in March to the fastest pace in eight months, as more Americans are upgrading their houses in a positive sign for the broader economy, according to information released Tuesday, April 25, 2017, by the Commerce Department. (AP Photo/Keith Srakocic)

In this Monday, Feb. 27, 2017, photo, real estate signs mark the lots near one of the new homes for sale in a development for new homes in Cranberry Township, Butler County, Pa. U.S. sales of new homes shot up in March to the fastest pace in eight months, as more Americans are upgrading their houses in a positive sign for the broader economy, according to information released Tuesday, April 25, 2017, by the Commerce Department. (AP Photo/Keith Srakocic)

WASHINGTON (AP) — U.S. sales of new homes shot up in March to the fastest pace in 8 months, as more Americans are upgrading their houses in a positive sign for the broader economy.

The Commerce Department said Tuesday that new-home sales rose 5.8 percent last month to a seasonally adjusted annual rate of 621,000, the highest rate since July last year. Sales are running 12 percent higher during the first three months of this year than during the same period in 2016.

Homebuilding helps to feed growth across the economy. Housing starts and new-home sales are climbing amid a shortage of existing homes on the market, generating gains in construction jobs and sales of building materials. The real estate sector is still recovering from the bursting of the housing bubble a decade ago, with sales last month on pace to more than double the total for all of 2011.

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“Strong demand from homebuyers and very tight supply conditions in the overall housing market are fueling demand for new homes,” said Tian Liu, chief economist at Genworth Mortgage Insurance. “In addition, prices on new homes are stabilizing, suggesting more affordable homes are coming to the market, which will help builders capture more demand from first-time homebuyers.”

The median sales price has increased just 1.2 percent over the past year to $311,400 in March.

New-home sales jumped last month in the Northeast and West, grew modestly in the South and fell in the Midwest.

Residential construction firms have added 112,600 workers over the past year, a 4.2 percent increase. Still, there are fewer residential construction jobs than in the middle of 2008 when mortgage defaults began to trigger a financial market crisis.

Some of the gains for new housing reflect a lack of supply of existing homes on the market.

Even as sales and prices of existing homes have risen, the available inventory has fallen 6.6 percent over the past year to 1.83 million properties. This means there are essentially more buyers chasing fewer properties, causing prices to rise and possibly making new construction an increasingly attractive choice.

The Standard & Poor’s CoreLogic Case-Shiller national home price index, also released Tuesday, rose 5.8 percent in February. That is the most in 32 months and more than double annual wage growth.

Demand might increase further this month as mortgage rates have slipped in recent weeks.

Mortgage had been climbing after President Donald Trump won the November election, under the belief that the government would engage in forms of stimulus such as tax cuts and greater deficits that could cause higher levels of inflation. But the path forward on major initiatives such as overhauling the tax code has become much more muddled in recent weeks ahead of the White House announcing his guidelines this Wednesday.

The average interest rate on 30-year fixed-rate home loans declined to 3.97 percent last week from 4.08 percent previously, according to mortgage buyer Freddie Mac. The average is now at its lowest level in five months.