City % Overvalued
Austin, TX 17.7%
Dallas/Forth Worth, TX 15.2%
Corpus Christi, TX 14.2%
Lubbock, TX 11.9%
San Antonio, TX 11.0%
Beaumont/Port Arthur,TX 10.6%
Raleigh-Durham-Chapel Hill, NC 8.6%
Greensboro-Winston-Salem-High Point, NC 8.5%
Brownsville-Harlingen-San Benito, TX 8.0%
McAllen-Edinburg-Mission, TX 6.8%
Fayetteville, NC 3.9%

Source: John Talbott, former investment banker at Goldman Sachs, visiting scholar at the UCLA Anderson School of Management

I would like to know which cities are NOT overvalued, and your proof.

Commercial real estate is in a bubble too. The December 6 2006 story in the Washington Post:
“The new story is the bubble in the commercial real estate market — offices, hotels and retail establishments — which has generated spectacular returns for investors over the past few years. Prices have risen to ridiculous levels, relative to the risk involved and the amount of income generated by these properties. But even those prices don’t seem to scare away pension funds, university endowments and Arab investors, who continue to pour hundreds of billions of dollars into real estate investment trusts, private-equity real estate funds and hedge funds that specialize in real estate finance.

Exhibit A is the purchase of Equity Office Properties, the country’s biggest owner of office buildings, by the real-estate arm of the Blackstone Group, a private equity firm. What you need to know about this $36 billion deal is that 80 percent of the purchase price will be financed with debt, and that the “cap rate” — the rate of return from next year’s rental income — is an estimated 5.5 percent.”

Commercial real estate lags residential real estate, that is just basic knowledge. Sam Zell knows this all too well – he just sold $20 billion of REIT’s to a private equity group, cashing out of the commercial real estate bubble.

I think REITs are going to be hit hard next year. This economic slowdown will bring a glut of vacancies to that sector.