Despite its high REO saturation rate, Las Vegas is shaping up to be the next Phoenix as it exhibits concentrated gains in discounted home price segments.

According to Clear Capital’s latest home data index, Phoenix held its ground in September as the strongest metro with 27.7% yearly growth. The metro is the benchmark for recovering markets, with low price points on distressed sales attracting buyers.

Las Vegas, meanwhile, set home price gains of 8% in September and should see more growth of 9.5% over the next six months. The market found its footing despite relatively high rates of REO saturation of 35.7%. Clear Capital says REO saturation in the city has shifted from a headwind to a tailwind.

National annual home price growth picked up in September, climbing 3.6%, with additional gains of 2.2% forecast throughout the next six months. The six-month forecast of the firm’s index of 50 metros shows all but seven should see growth over the next six months. Two-thirds of the top 15 metros are in the West.

“Regardless, the fiscal cliff has no geographic boundary,” the firm says. “Even the healthiest of markets will suffer under the weight of uncertainty.”

Clear Capital projects Phoenix prices to expand another 10.7% throughout the next two quarters.

“As this low price point market continues to rise, it will eventually price out some of the current demand pool,” the firm says. “But at this point, it continues to offer attractive potential to buyers. Should the forecast be realized, Phoenix's future median price of $174,000 would remain 33.3% below the peak of $262,000.”

If Las Vegas looks like the next Phoenix, Memphis looks more like the next Atlanta. Home prices in Memphis are down 48.3% from their peak, with further declines expected.

Memphis home prices will fall another 2.1% over the next six months, Clear Capital forecasts. REO saturation rose by 8.6 percentage points over the year, to 42.2%. “The market has yet to acclimate to the highly distressed environment,” says Clear Capital.

Detroit is the only other market in the index that has an REO saturation rate above 40%. With yearly declines of 9.8%, Memphis is a hard hit market that has yet to find the bottom.