As you know, there’s a difference between price and value. A price is the inefficient maximum of what the market will pay for an asset. So if there’s an influx

As you know, there’s a difference between price and value. A price is the inefficient maximum of what the market will pay for an asset. So if there’s an influx of wealthy people to an area (or cheap subprime credit), properties will ride a wave up as those credit-flush buyers compete for a limited pool of homes. But my home doesn’t generate cash flows, so it’s impossible to say the home is “over valued” because there is no objective benchmark. Perhaps someone is selling my great grandfathers homestead. it will be “valued” more highly by me, and I may “over pay” because I want that property. Or there is only one property available per year in a small neighborhood and I must have it. The value is psychological. At a market level, look at the percentage of household monthly income spent on housing to gauge the market’s mood. If that strays from historical norms, it’s possible that the market is temporarily overheated. Keep in mind that historical trends are distorted by the recent zero-interest rate policy from the Fed, too. https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2016/03/household-expenditures-and-income https://www.pewtrusts.org/en/research-and-analysis/issue-bri...