real estate

Crack in the Real Estate Foundation

Rising Home Prices Crack Foundation of U.S. Real-Estate Recovery

Photographer: David Paul Morris/Bloomberg

A potential home buyer views a model home in San Ramon, California, on Jan. 24, 2014.

A crack is starting to form in the foundation of the U.S. housing-market recovery that extends beyond bad winter weather.

“A rise in interest rates, combined with the rise in home prices, has quickly and surprisingly made a lot of markets unaffordable for home buyers,” saidDaren Blomquist, vice president at property-data firm RealtyTrac Inc. in Irvine, California.

Sales of new homes slumped 14.5 percent to a 384,000 annualized pace, the weakest since July, Commerce Department data showed today in Washington. Purchases fell in three of four regions, including a 16.7 percent decline in the West to the lowest level since January 2012.

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