The United States appreciates the intervention of Prime Minister Benjamin Netanyahu which postponed a planned demolition of houses in the East Jerusalem neighborhood of Silwan, a State Department official told reporters on Tuesday.

Netanyahu urged Jerusalem mayor Nir Barkat earlier Tuesday to reconsider the plan to avoid sparking further tensions. The prime minister said, however, that he would not intervene with the administrative matters of the city, nor undermine the mayor's authority.

According to the plan, most of which was reported in the New York Times a few days ago, Barkat is seeking to reach an agreement with the residents of 89 illegal buildings slated for demolition in the Palestinian area known as Al Bustan or Gan Hamelech.

Barkat promised the prime minister that he would try to reach an agreement with the residents and would put off implementing the plans.

"We are aware of the Mayor's plan to develop the Bustan/Gan Ha-Melech area of Silwan," the State Department official said on Tuesday.

"We've noted that, at Prime Minister Netanyahu's urging, which we appreciate, the Mayor is going to continue his discussions with the residents before proceeding with moving the plan through official processes," the U.S. official added.

Referring to East Jerusalem building in the context of the stalled peace talks between Israel and the Palestinians, the State Department official urged "both parties to refrain from unilateral actions that, whether intended to or not, undermine trust and efforts to resume negotiations that will bring an end to the conflict and result in a two-state solution."

"We believe it is of great importance that negotiations between Israel and the Palestinians resume as soon as possible," the official added.

About a year ago Barkat became embroiled in a high-profile conflict with Secretary of State Hillary Clinton over his intention to demolish the homes. Barkat is now offering permits to some residents to legalize their buildings. Others will be demolished and replaced with a tourist park. The Palestinians whose houses are demolished will be able to operate tourist-related businesses in the park.

Barkat has been attacked on the left because it is believed that this will allow him to avoid sealing Beit Yonatan. Meanwhile, not far from Gan Hamelech a large pit opened near one of Silwan's mosques. According to the Palestinians and the leftist organizations that support them, the pit, the fifth to open over the past two months, is due to archaeological excavations underway by the Elad association and the Israel Antiquities Authority. The excavations have uncovered a street from the Second Temple period.

Fakhri Abu Diab, a spokesman for Silwan residents, said the Jerusalem municipality was using the idea of a park as a pretext to drive Palestinian residents away.

"This is a political decision. It has nothing to do with just building a biblical park. They want us out of Silwan and Jerusalem for political reasons," he said.

"They cannot come now and say we should leave because they want to take our homes and build a park in their place," he told the German Press Agency.

About two months ago Supreme Court Justice Edna Arbel rejected a petition by Palestinian residents of Silwan against the dig, saying that there was no proof it was responsible for the pits and cracks in homes.

Rabbi Arik Asherman, CEO of Rabbis for Human Rights, said: "Despite the High Court ruling that the excavations and the cracks and pits are unconnected, we saw today more proof of the very direct connection."

Elad said they had not heard about the pit; however, the Supreme Court had twice rejected Palestinian claims on the matter, the houses were "irregularly built and with problematic infrastructure," and such things happen after heavy rain. "Funding of NIS 30 million to restore the road and infrastructure is being delayed by the human rights groups' petition," Elad said.

Barkat was to hold a press conference later Tuesday in which he will unveil his plan for solving some of the capital's thorniest construction issues, in Silwan in East Jerusalem.

During the press conference, Barkat is expected to announce that he wants to pursue a plan that will retroactively legalize housing, including Beit Yonatan, owned by settlers. State Prosecutor Moshe Lador has instructed that Beit Yonatan be sealed in compliance with a court order