U.S. housing starts increase more than expected in March

© Reuters/LUCY NICHOLSONFILE PHOTO: A new apartment building housing construction site is seen in Los Angeles

WASHINGTON (Reuters) - U.S. homebuilding rebounded more than expected in March, but soaring lumber prices amid supply constraints could limit builders' capacity to boost production and ease a shortage of homes that is threatening to slow housing market momentum.

Housing starts surged 19.4% to a seasonally adjusted annual rate of 1.739 million units last month, the Commerce Department said on Friday. Economists polled by Reuters had forecast starts would rise to a rate of 1.613 million units in March.

(Reporting by Lucia Mutikani; Editing by Toby Chopra)