The number of residential projects that builders broke ground on last month came in at a seasonally adjusted annual rate of 2 million units, according to a report released today by the U.S. Commerce Department.

The advance in housing construction, the largest since May 2003, came after two straight months in which housing construction dropped. Those previous declines were blamed on bad weather in some parts of the country, which forced construction delays.

March's performance was stronger expected. Analysts had projected that housing starts for the month would come in at approximately 1.9 million units. Recent reports of a strengthening U.S. economy have caused long-term mortgage rates to climb. Rates on 30-year mortgages rose to 5.89 percent this week, the highest since early December. Still, economists believe that home sales, which hit all-time highs last year, will remain healthy this year.

By region, new residential projects under way in March rose by 10.6 percent in the Midwest to a seasonally adjusted annual rate of 386,000. In the South, housing construction increased by 8.5 percent to a rate of 945,000 units, and in the West, housing starts rose by 3.7 percent to a pace of 502,000. But in the Northeast, new housing projects dipped by 4.9 percent to a rate of 174,000.

Permits filed to build new housing projects rose by 1.9 percent in March from the previous month to a rate of 1.9 million units. The rise in permits came after two straight months of declines.