According to reports, Fitch Ratings' latest report indicates that 88% of housing prices in major U.S. metropolitan areas are overvalued.

The top three overvalued markets are North Charleston in South Carolina, El Paso in Texas, and Camden in New Jersey.

Fitch noted that more than half of these overvalued real estate markets have housing prices that are on average overestimated by 10% or more. As of the second quarter of 2023, housing prices across the U.S. were overvalued by 9.4%.

Data from the National Association of Realtors shows that the median price of U.S. homes has been rising for five consecutive months, reaching $387,600 in November.

Over the past year and a half, alongside the Federal Reserve's aggressive interest rate hikes, mortgage rates in the U.S. have soared, increasing by 6.7% from January to September this year. Despite the high rates, due to low inventory and strong demand, housing prices have continued to rise, repeatedly reaching new historical highs this year.

In the past two months, U.S. mortgage rates have started to decline and have now fallen below 7%. While this has somewhat boosted demand, Fitch states that housing inventory is likely to remain at lower levels.

Fitch anticipates that U.S. housing prices will climb further by the third quarter, continuing to stay high. "Nationally, overvaluation still dominates."

However, Fitch believes that the growth rate of nominal housing prices will slow down. It projects an increase of 0%-3% in 2024 and a rise of 2%-4% in 2025.