WASHINGTON Reuters U.S. homebuilding increased more than expected in June, though expensive lumber as well as shortages of labor and land continued to constrain builders ability to fully take advantage of robust demand for housing.

Housing starts rose 6.3 to a seasonally adjusted annual rate of 1.643 million units last month, the Commerce Department said on Tuesday. Data for May was revised down to a rate of 1.546 million units from the previously reported 1.572 million units.

Economists polled by Reuters had forecast starts rising to a rate of 1.590 million units. Despite last months increase, starts remained below Marchs rate of 1.725 million units, which was the highest level since June 2006.

Permits for future homebuilding fell 5.1 to a rate of 1.598 million units in June.

Though lumber futures have dropped nearly 70 from a record high in early May, softwood lumber prices increased 125.3 yearonyear in June, according to the latest producer price data.

While many endusers are relieved to see lumber prices cratering closer to historical norms, buyers should still expect elevated volatility in the market with wildfire season raging out West, log prices soaring in the British Columbia Interior and duties potentially set to increase on Canadian producers later this year, said Dustin Jalbert, a senior economist at Fastmarkets.

Demand for housing is being driven by low interest rates and a migration from cities in search of spacious accommodations in the suburbs and…