JERUSALEM - Prime Minister Benjamin Netanyahu has refrained from initiating new housing projects in Israeli settlements in the West Bank, hoping to reach common ground with Washington, a government minister said on Tuesday.

Since the government was established five months ago, no tenders have been issued for Judea and Samaria, Housing Minister Ariel Atias said, referring to government invitations for bids for new construction in West Bank settlements.

The fact is, we are in a holding pattern ... an attempt, I believe, to reach an understanding with the U.S. administration and a comprehensive peace agreement, Atias told Israel Radio.

The anti-settlement Israeli organization Peace Now confirmed no new tenders had been issued but said more than 1,000 housing units were currently under construction in the Israeli-occupied West Bank on land Palestinians want for a state.

In Washington, White House spokesman Robert Gibbs said: I think both sides believe we are making progress on the settlement issue, but gave no further details.

U.S. President Barack Obama has demanded Israel halt all settlement activity in line with a 2003 peace road map that also calls on Palestinians to rein in militants.

Netanyahu has resisted a total suspension of settlement expansion and is due to meet Obama's Middle East envoy, George Mitchell, in London next week in a bid to end the most serious rift in U.S.-Israeli relations in a decade.

COMPROMISE

Peace Now played down the significance of the freeze in fresh projects saying government-sponsored building accounted for only 40 percent of Israeli construction in the West Bank.

Most of the building is through private initiatives from settler groups and non-governmental organizations, Peace Now said in a statement.

Palestinian President Mahmoud Abbas has made a resumption of peace talks with Israel, suspended since December, conditional on a complete settlement freeze.

But Israel hopes to persuade the United States to accept a continuation of existing building projects to meet the needs of the growing population in settlements the Israeli government hopes to keep in any future peace deal with the Palestinians.

Washington has been trying to persuade Arab states to take initial steps toward normalizing relations with Israel as part of a settlement deal. On Tuesday in Washington, Obama was to meet Hosni Mubarak, president of the biggest Arab state, Egypt.

Some 500,000 Israelis live in the West Bank and Arab East Jerusalem, territory Israel captured in the 1967 Middle East war. The West Bank is home to 2.5 million Palestinians.

(Editing by Charles Dick)

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