Sales of new homes declined sharply in September as surging mortgage rates drove would-be buyers out of the market.

Signed contracts for new single-family homes fell 10.9 percent to a 603,000 annualized pace, data from the Census Bureau showed Wednesday.

The estimates for the previous three months were revised down, indicating that the market was weaker than previously thought.

Compared with a year ago, new home sales are down 17.6 percent. Compared with September of 2019, the last comparable month prior to the pandemic, sales are down 16.1 percent.

Despite the large decline, sales exceeded expectations. Economists had forecast an annual pace of 585,000.

Sales surged in August after mortgage rates took a temporary dip in July and August, with the average rate on a 30-year mortgage falling from 5.81 percent in late June to 4.99 percent in early August. Since then, however, rates have climbed sharply. This Mortgage Bankers Association reported Wednesday that the average rate on the 30-year fixed mortgage had hit 7.16 percent last week, the highest since 2001.

Mortgage rates have been surging higher as the Fed has made it clear that it has no intention of lowering rates next year and is willing to accept a recession as the price of bringing down inflation. Expectations for the Fed’s so-called “terminal rate”—the highest rate target expected in this cycle—have moved up sharply, with markets and forecasters now indicating that the Fed will raise the top of its target range to five percent next year. The current target is a range of three percent to 3.25 percent but that is expected to be raised to 3.75 to four percent at the Fed’s meeting next week.

Despite declining sales, home prices are still up sharply on the year. Wednesday’s report indicated that the median sales price of a new home rose 13.9 percent from a year earlier to $470,600. Compared with the prior month, the median price was up 8 percent before seasonal adjustments.

Home builder sentiment has declined every month this year, the longest stretch of consecutive declines on record. It is now at the lowest it has been—outside of the first months of the pandemic—since 2012. Construction spending has been falling as well. In August, construction spending on single-family homes dropped 2.9 percent.