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You can't claim "overvalued" unless you have a model that tells you what the price should be. That's all the difference there is, really. Everyone telling you

You can't claim "overvalued" unless you have a model that tells you what the price should be. That's all the difference there is, really. Everyone telling you that housing prices in Silicon Valley are "overvalued" really are saying "it's too expensive for me". But they have no data to back it up, so they're declaring something with no proof or evidence. In order to do that you need a model to show you what a fair price should be based on the model, and how the market has deviated from that model.

lotsofpulp 8y ago
The only thing that tells you what prices should be is an active market place where transactions (proportional to the number of market participants) are happening. If sellers and buyers are in agreement about the price of something, then the only other way I could see one defining overvalued (and undervalued) is over a certain time period, but then you would also have to classify what class of assets and level of risk you are comparing it to. But in most cases, "overvalued" and "undervalued" are meaningless terms for when someone can't afford something, or someone doesn't want to sell something at a lower price.