While some might be rejoicing at the recent rising home prices and rising home sales seen across the nation, Fitch Ratings “still views these gains cautiously.” In fact, the agency predicts price gains will slow and perhaps even reverse over the next year.

Fitch expects a price “trough in the middle of 2014” but suggests inflation will keep prices from falling more than 3.5 percent.

“While rising prices and sales volumes suggest a recovery, they are not moving in sync with key economic indicators that would otherwise support a sustainable price level,” Fitch stated in its most recent quarterly report.

Fitch points to unemployment as one of these “key economic indicators.” Unemployment has declined from its high of 9.9 percent in 2010 to 7.7 percent.

However, the bulk of this decline is the result of fallout in labor force participation, not an improving employment situation, according to Fitch.

With a true picture of national unemployment in hand and an undeniable trend of rising home prices across the nation, analysts must look elsewhere for the cause of the upward price trend.

Fitch chalks it up to pent-up demand. Persistent low interest rates, little new construction, and formerly-reluctant buyers are bringing action to the market, but Fitch warns this burst in demand will not last.

The agency maintains real prices are currently overvalued by 10 percent.

Nationally, prices are about 4 percent above their fourth-quarter 2011 trough, and a majority of the top metropolitan statistical areas (MSAs) have experienced rising prices over the past year—19 of the top 25, according to Fitch.

However, 264 of the 379 MSAs Fitch observes are within 2 percent of their troughs.

Some regions are experiencing more price movement than others, and some of the cities hardest hit by the housing crisis are now experiencing the greatest price increases. For example, Miami, Phoenix, and Detroit have all experienced price gains of more than 10 percent from their troughs during the housing crisis.

Other hard-hit cities experiencing notable rises in prices include Las Vegas, where prices are up 6 percent from their trough; Stockton, California, also up 6 percent from its trough; Atlanta, where prices are up 9 percent from their trough; and Minneapolis, where prices have risen 7 percent from their trough.