Potential home buyers continue to be deterred by high mortgage rates, rising construction costs and economic uncertainty, according to an analysis by the National Association of Home Builders (NAHB).

Newly built single-family home sales dropped 0.6% in July, falling to 652,000 annually, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“Elevated mortgage rates and ongoing economic uncertainty are weighing heavily on buyer demand,” says Buddy Hughes, NAHB chairman and home builder and developer from Lexington, North Carolina. “Meanwhile, an elevated inventory of unsold homes, fueled by lagging sales, is prompting concerns over potential cutbacks in new construction.”

In July, 17% of new homes were priced below $300,000 and 31% were priced above $500,000. New single-family home inventory remained steady at 499,000 residences marketed for sale as of July, 0.6% lower than June, and 7.3% higher than a year ago.

The median new home sales price was down 5.9% from last year at $403,800, primarily attributed to home builders’ rising use of sales incentives.