Amid higher construction costs and rising interest rates, single-family housing starts have fallen to a two-year low, according to the National Association of Home Builders.

“Increased interest rates, building material supply chain bottlenecks and elevated construction costs continue to put a damper on the single-family housing market,” the NAHB said. “For the first time since June 2020, both single-family starts and permits fell below a 1 million annual pace.”

Overall housing starts fell 2% to a seasonally adjusted annual rate of 1.56 million units in June from an upwardly revised reading the previous month, NAHB said, citing a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The June reading of 1.56 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months, NAHB said. Within this figure, single-family starts decreased 8.1% to a 982,000 seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 10.3% an annualized 577,000 pace, the association said.

“While the multifamily market remains strong on solid rental housing demand, the softening of single-family construction data should send a strong signal to the Federal Reserve that tighter financial conditions are producing a housing downturn,” said NAHB Chief Economist Robert Dietz. “Price growth will slow significantly this year, but a housing deficit relative to demographic need will persist through this ongoing cyclical downturn.”