SILVER SPRING, Md. (AP) — U.S. home construction fell 1.6% in September as builders continue to be tripped up by supply chain bottlenecks.

The Commerce Department reported Tuesday that the decline in September left home construction at a seasonally adjusted annual rate of 1.56 million units, 7.4% above the rate one year ago. August's number was revised upward to 1.72 million from 1.62 million.

Applications for building permits, a barometer of future activity, declined 7.7% from August to 1.59 million, but is virtually unchanged from September 2020.

Low interest rates and a desire for more space have lured buyers into the market, but rising costs for materials and a years-long shortage of supply have pushed prices up. Economists and builders say demand remains strong, even as the median price for a new home is about 20% higher than a year ago.

"Momentum in demand still appears to be positive," said economist Rubeela Farooqi of High Frequency Economics. "But supply is struggling to catch up given higher input costs and shortages that remain headwinds for builders."

Apartment construction fell 5.1% from August to September, while single family home construction was flat from the previous month at 1.1 million units.

Construction activity by region saw declines of 27.3% in the Northeast and 6.3% in the South. The West made the biggest gain, with starts up 19.3% over August, while the Midwest came in 6.9% higher.

"The story has been unchanged this year from one month to the next," said Stephen Stanley, an economist with Amherst Pierpont. "Builders are doing all that they can, but it is not enough to keep up with the burst in demand created by the pandemic."

A monthly survey of builder sentiment by the National Association of Home Builders and Wells Fargo showed sentiment improved to 80 in October from a reading of 76 in September. The index hit a record reading of 90 last November.