Back in early 2006, National City Corp. and IHS Global Insight compiled a report of over-valued real estate by city.  The report, at the peak of the real estate bubble, purported to show the most over-valued cities ranked.  The report listed 213 cities as over-valued, and the top city was Naples, FL, with 84% of homes valued over fair market price.  Of course, Naples didn't take this well, hiring economists and real estate agents to dispute the survey.

Well, today, the same measuring methods show Naples, FL homes to be selling at a 29% discount, and the median home price is $199,900, down from $390,000 in 2006.  It doesn't seem to be a lucky guess, as the same report showed multiple cities at the top of the over-valued list as valued well below the indicated fair market values in 2010.  It seems that real estate bubbles do more than just pop.  Richard DeKaser, who engineered the report for National City has this to say:  "At the risk of immodesty, I must say the whole model has performed too well to believe.  I've done some research that shows that when you get a bubble, you don't just return to normalcy.  You go past normalcy for a long period of undervaluation."

The list today tops out with Atlantic City, NJ, over-valued by 30.2%.  The study concludes that 30% is the danger point, and currently Atlantic City is the only city over that amount.  Just below are the next two cities, Wenachee, WA and Ocean City, NJ.

Interesting to see that Las Vegas, Nevada is listed as the TOP UNDERVALUED city* at 41% as compared to being over valued by 38% in 2006.  Those buying now in Las Vegas are seeing tremendous reductions in home prices.  This makes an interesting play for investors who can now purchase, rent and turn a nice monthly profit. 

*you can toggle between overvalued and undervalued lists on this page.