WASHINGTON (Reuters] – The U.S.’s homebuilding declined unexpectedly in September because of persistent shortages. These are causing a slowdown in the economy as well as the housing market.

The Commerce Department reported Tuesday that housing starts decreased 1.6% to a seasonal adjusted annual rate last month of 1.555 millions units. The August data was revised to 1.580million units, down from the previous reported 1.61 million units.

Reuters polled economic experts and predicted that the rate at which starts rise would be 1.620 million units.

Last month, permits for future homes were down 7.7% to 1.589 millions units.

Although lumber prices are down in recent months but have not yet reached builders, they have seen a drop in their prices. The supply of building materials like windows, electric breaker boxes and other construction materials is limited. Due to the COVID-19 epidemic’s disruption of the labor market dynamics and resulting price increases across all sectors of the economy, the supply chain is now strained.

There has been a decline in starts from March’s 1.725million unit-rate level, which was at a high of 14-1/2 years. A huge backlog exists of houses that are authorized but have not been started.

The National Association of Home Builders released Monday’s survey, which showed that single-family homebuilders are more confident than ever in October. However, it noted that builders continue to struggle with supply chain disruptions as well as labor shortages which delay completion.

Housing market boomed early after the coronavirus pandemic. This was due to a large exodus of people from cities to low-density areas as they sought out more spacious housing for their online schools and home offices. The tailwind has slowed as people return to their offices, and schools have reopened for face-to-face learning thanks to COVID-19 vaccinations.

Inflation is also increasing mortgage rates. Data from the mortgage giant shows that last week’s average fixed 30-year mortgage rate was 3.05, up from 2.99%. Freddie Mac (OTC).

Even though the historical average for house prices is still quite low, higher borrowing costs might make homeownership less accessible to first-time buyers. In July, house prices experienced a record-breaking double-digit increase on an anual basis.