(The Hill) — Sky-high mortgage rates and a construction slowdown could push record rents and home prices even higher, further threatening housing affordability for millions of Americans. 

Economists say that rising mortgage rates should cool down the housing market’s red-hot price appreciation in the short term but are also likely to drive up rents. New construction of houses and apartments is waning, suggesting that the nation’s meager housing supply won’t improve any time soon. 

“It’s a perfect storm right now,” said Jerry Konter, a Savannah, Ga., residential property builder who chairs the National Association of Home Builders. “I don’t think I’ve ever seen this many red flags at one time in my entire career.” 

Total housing starts fell 14.4 percent from April to May, reaching a 13-month low, according to Commerce Department data released last week. Construction of multifamily housing, which includes apartments, plummeted 23.7 percent month-over-month.  

Home builders expect that trend to continue, warning that they’re under pressure from rising interest rates, global supply chain snags, higher material costs, a shortage of workers and other issues that are slowing down new construction.  

The building slowdown comes as home prices remain at record highs. An average home in the U.S. sells for more than $430,000, according to real estate brokerage Redfin, which found that home prices rose 14.8 percent over the last year and 60 percent in the last five years. 

The price appreciation is driven by dwindling housing supply that took a deep dive during the pandemic. Less than 1.5 million homes were listed for sale last month, down from 2.4 million during the same period five years ago. 

Those looking for lower-cost homes are running out of options. Builders aren’t erecting many houses that first-time home buyers can afford, because the current environment makes it difficult for them to turn a profit on those projects, Konter said. 

“The first-time homebuyer is being squeezed, which also squeezes renters because those people are no longer moving out of their apartments, and so rents are going to go up,” he added. 

Rents have steadily risen alongside house prices. Redfin found that the median monthly rent surpassed $2,000 last month and rose 15.2 percent over the last 12 months. 

“Although we expect rent-price growth to continue to slow in the coming months, it will likely remain high, causing ongoing affordability issues for renters,” Redfin deputy chief economist Taylor Marr said in a note, adding that mortgages are outpacing rents in some areas and more Americans are choosing to live alone. 

Advocates have warned that the affordability crisis will lead to increased homelessness. A recent U.S. census study found that 8.8 million Americans were behind on their rent payments from late April to early May, up from 1.7 million individuals one year ago.  

The Federal Reserve hiked interest rates by 75 basis points last week in its fight to cool down the nation’s surging inflation. The move, which will make it more expensive to build new homes, prompted the average 30-year fixed mortgage rate to rise to 5.78 percent, the highest mark in over a decade, according to Fannie Mae. 

Higher mortgage rates are pricing first-time buyers out of the market. Under current 30-year rates, the monthly payment on a $430,000 loan is more than $2,500, up from roughly $1,800 one year ago.  

Federal Reserve Chairman Jerome Powell acknowledged that home prices “might keep going up for a while even in a world where rates are up” and indicated that first-time homebuyers should stay on the sidelines for now. 

“I would say if you’re a homebuyer, or a young person looking to buy a home, you need a bit of a reset,” Powell said during a press conference. “We need to get back to a place where supply and demand are back together and where inflation is down low again and mortgage rates are low again.”  

It’s unclear when that will be. Some economists point to May home completions increasing 9.3 percent year-over-year, including a 33.2 percent increase in multifamily completions, as one reason to be optimistic that housing supply will recover.  

Others, like Powell, are hoping for the completion of a massive supply of unfinished homes that have been delayed by supply chain issues and labor shortages. Home builders warn that those delays will continue to plague the construction of new homes.  

The U.S. faces a shortfall of 1.5 million homes, according to a study from Moody’s Analytics, and that number could continue to rise as more millennials look to buy their own houses. The National Low Income Housing Coalition estimates that the U.S. has a shortage of 7 million rental homes that are affordable for extremely low-income renters. 

Last month, President Biden announced an action plan that attempts to close the housing shortfall within five years. The White House aims to incentivize local governments to build denser cities with more affordable housing, create new financing mechanisms for manufactured homes, expand federal financing and rehabilitate hundreds of thousands of homes, among other measures. 

“The plan’s policies to boost supply are an important element of bringing homeownership within reach for Americans who, today, cannot find an affordable home because there are too few homes for sale in their communities,” the White House said in a statement.