Previously owned home sales contracts missed expectations in June as rising mortgage rates, and high home prices combined to reduce affordability for first time and entry-level homebuyers.

The National Association of Realtors issued its Pending Home Sales Index, based on signed contracts. The index showed that signed contracts dropped 8.6% to 91.0 last month. All four regions saw contracts decline.

In Reuters polling, economists had forecast that contracts, which will become sales after one to two months, declined 1.5%. Pending home sales were down 20% on a year over year basis in June.

As the rate on a 30-year fixed rate mortgage has risen to an average of 5.54%, the cost of financing has priced many homebuyers out of the market. The rate is now more than 2% higher than it had been in January, due to soaring inflation and an aggressive Federal Reserve which has been pursing an aggressive policy of monetary tightening.

And now mortgage rates will rise again, after Wednesday’s 75 basis point hike by the Fed at their monthly policy meeting. The total interest rate hike since March is now 225 basis points.

Data last week had shown that sales of previously owned homes dropped in June, making it the fifth straight month of drops. Housing starts and building permits also dropped for the month in June. The only thing preventing a collapse of the market is a continuing tight supply situation.

It is expected slowing demand will help to bring supply into line with demand, and slow the rise in home prices.