Will All Major Cities Eventually Become Over-valued?

[Steve DellaPelle]

I am young at 24 years old and do not have much experience in real estate and the cycles that the markets inevitably go through.

Some things that I have noticed are that we see some very over-saturated markets such as Boston,  New York, San Diego, San Francisco, etc. where the prices are extremely high (compared to the average) and we see much smaller and less-saturated markets such as Nashville, Jacksonville, Charlotte, etc. where prices are low or at the average.

Will there be a day when all of these other markets catch up and eventually become over-saturated? Will these low prices not last forever as we see more and more investor action or will there always be other major cities out there that provide more opportunity?

Just some thoughts :)

[Christopher Brainard]

@Steve DellaPelle

Prices in Nashville will never be the same as New York, however, any market can get saturated regardless of the price point. In my opinion, every market has a 'base' value, which is created by non investors, and driven by their personal needs, their income, where they want to live, the economy, the weather, fear, etc. Areas that have little land and are in high demand will always carry a premium over places with ample land or that aren't as desirable. 

The investment community then applies a bias on top of that, either negative or positive, which further drive the pricing. Right now, I think the investor bias is very high which reduces the overall number of great opportunities. When a deal becomes available, you can almost guarantee that a hundred other investors are also on top of it. As long as the base values keep going up, I expect this to continue. Once base values start to fall and the investors start looking to jump ship, we'll probably see a small correction in prices. 

-Christopher