U.S. homebuilding fell sharply in July, weighed down by higher mortgage rates and prices for materials, suggesting that the housing market could contract further in the third quarter.

Housing starts plunged 9.6% to a seasonally adjusted annual rate of 1.446 million units last month, the Commerce Department said on Tuesday. Data for June was revised slightly higher to a rate of 1.599 million units from the previously reported 1.559 million units.

Economists polled by Reuters had forecast starts declining to a rate of 1.540 million units.

Permits for future homebuilding fell 1.3% to a rate of 1.674 million units.