According to data from the Commerce Department out this week, the number of housing starts rose 6.8% last month from January. But home builders say that rising mortgage rates, on top of rising costs for building materials, have dampened their outlook for future sales.

So what does that mean for the sales of existing homes that have already been lived in, especially in a market that’s tight?

Raleigh, North Carolina, is a research powerhouse. Lots of people go there for jobs in tech and medicine. But if they want a newly built home, real estate broker Sheryl Merritt said those houses aren’t always ready. 

“So, a lot of people who are looking, you know, some of them are kind of ready right now. So that’s where existing homes are most popular,” she said.

Existing homes are selling on average for more than 2% above their listing price, she said.

Now, with interest rates for mortgages going up, “what we expect is that more and more buyers are going to be priced out of the market,” said Taylor Marr, deputy chief economist at Redfin. “And therefore, we might see a decline in existing home sales throughout this year.”

In Raleigh, Merritt said the city is considering some creative solutions. It recently approved the construction of tiny homes, which it defines as dwellings under 600 square feet.

“Where you can put a house or a tiny house on a lot that already has a single-family home on it.”

Merritt has heard of homeowners with big yards who are thinking of doing this. So, an existing home could give birth to a new home … kind of.