I've heard some investment professionals suggest that a market is "too hot" or "overheated". It becomes clear that demand exceeds supply in the markets they've mentioned, when I look at auction clearance rates, vacancy rates, stock on market, selling speed, discounting and a whole bunch of other metrics. One of the symptoms they often quote is that buyers are paying "too much" i.e. above "fair market value". I don't see a problem with this. In fact, capital growth can't occur unless most buyers are paying above fair market value - that's what growth is by definition. But could there be some Goldilocks middle ground that the 400-year old law of supply and demand hasn't shown all those economics professors? I've been scoring suburbs on their supply and demand for over a decade now, country-wide. I've never seen a case where demand exceeded supply by “too” much and the growth was actually inverted as a result. But I have seen price growth eventually knock the wind out of demand and restore balance over time. If demand still exceeds supply, there's a very good chance we're not at the peak of prices. Prices will need to keep rising to subdue demand or supply will need to rise to match the demand. Both cases take time and during that time there should be capital growth until balance is restored. I don't think there is a concept of "too hot" or "overheated" if we're talking about supply and demand as the measure of heat.