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Las Vegas, one of the epicenters of the real estate crash in 2007 to 2009, has yet to recover from its August 2006 speculative bubble peak, but recently, upside momentum in 2018 prices has Fitch Ratings, a nationally recognized statistical rating organization (NRSRO), very concerned about market stability.

While the S&P/Case-Shiller U.S. National Home Price Index remains strong as price broke above the July 2006 double top in 1Q17, there are signs that some real estate markets across the country are overheating with the Las Vegas market coming in at number one on the list, according to Fitch Ratings in its latest quarterly U.S. RMBS sustainable home price report.

The Las Vegas Review-Journal provides a visual guide — showing red-hot home prices over the past several years via Fitch data:

“Southern Nevada home prices were 20 to 24 percent overvalued in the first quarter, Fitch Ratings reported Wednesday.

That’s up from 15 to 19 percent overpriced in the same period last year and 10 to 14 percent overvalued in the first quarter of 2016.

Las Vegas was the most overpriced market among the 20 listed in Fitch’s report.

The credit-ratings company deemed prices sustainable in six metro areas, undervalued in two, and overvalued in the rest.”

The most troubling question: With the unemployment rate ticking higher in Las Vegas since November 2017, income growth among some residents stagnating, and Jerome Powell, chairman of the U.S. Federal Reserve, on a mission to raise interest rates before the next recession. Why are home prices in the region soaring at nearly twice the nationwide rate?

The Answer: “Home prices in Las Vegas have overshot economic fundamentals,” said Fitch Ratings Managing Director Grant Bailey. In other words, Bailey indicates that the Vegas housing market is full of speculators bidding up prices.

The ratings agency believes home prices in the Las Vegas-Henderson-Paradise, Nevada, metropolitan area are 20 to 24 percent above fair market value. Fitch again warns that “home prices running ahead of economic fundamentals.” Of the over 400 markets Fitch monitors, it finds 72 — or 17 percent — as overvalued.

“Roughly 17% of the country’s housing markets are more than 10% overvalued,” said Bailey.

“In particular, home prices in non-judicial foreclosure states are now more than 50% above their 2012 lows, and the price momentum appears to be carrying home prices above their longer-term sustainable values.”

Of the largest cities across the country, the most overheated real estate markets include Vegas (20-24 percent) and Phoenix (10-14 percent), as well as Portland, OR (15-19 percent) and Seattle, WA (10-14 percent). There are also several large metropolitan areas in Texas that are 10 to 14 percent overvalued. The home price growth rate in these areas is 2x to 3x faster than their fundamental factors such as rents or income, which leaves Fitch to believe that sustainability is now a concern in some of these markets.

As for Las Vegas, being the most overheated real estate market in the country, what could possibly go wrong with soaring real estate prices and rising interest rates?