WASHINGTON (Reuters) – Permits for future U.S. homebuilding tumbled to a five-month low in April, suggesting the housing market was slowing as rising mortgage rates contribute to reduced affordability for entry-level and first-time buyers.

But the report from the Commerce Department on Wednesday also showed a record backlog of houses still to be constructed, indicating the moderation in homebuilding would be marginal.

Homebuilding was already being constrained by soaring prices as well as shortages of materials. The housing market is the sector of the economy most sensitive to interest rates, with building permits a leading indicator for the sector.

“Housing construction appears to be undergoing a transition, with the sector caught between sharply rising mortgage rates and declining affordability on the one hand and supply-chain constraints on the other that continue to result in rising backlogs of projects,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

To continue reading the rest of the article, please click on the source link below: