The sentence is correct, of good style and will be used by native speakers. But this is also true for the version where the prepositional phrases change place. There is just a subtile difference in meaning:
Die Uhr hängt über dem Schrank an der Wand.
This sentence says: The place where the clock hangs is somewhere on the wall. If you've found the wall, search for the closet that stands at this wall and look above it. There you will find the clock.
So, the order is:
- find the wall
- find the closet on this wall
- find the spot above the closet
Die Uhr hängt an der Wand über dem Schrank.
This description starts with the closet. When you've found it, you are asked to look above it. Somewhere above the closet must be a wall. In this case it makes more sense to think of a "wall" as a section of the wall, because maybe the whole wall continues also left and right of the closet. When you've found (the section of) the wall above the closet, you will find the clock there.
- find the closet
- find (the section of) the wall above the closet
I think version 1 is more natural and I would prefer it, because you start with the bigger object (the wall) and narrow down the place step by step. Version 2 also comes with the disadvantage, that you have to divide the wall into smaller sections.
But both versions are correct and will be understood. And both versions will be used by native speakers.
But be careful!
- correct: Das Bild hing an der Wand über der Tür.
- bad choice: Das Bild hing über der Tür an der Wand.
Sentence 2 asks you to look for the wall at first place, and in the second step you are asked to find a door that stands or leans on this wall. This makes no sense. A door is a hole in a wall, also in German.
But there is another way to interpret all the sentences discussed here: The two local descriptions can be interpreted independently of each other.
- find the spot above the door (independently of the wall)
- find the wall (independently of the door)
- the clock is where both regions overlap
And now the phrase "über der Tür an der Wand" makes sense. But now this it no longer a sequence of description where the left one is refining its right neighbor. Now is is just a list of equivalent items and therefore needs a comma or the word "und":
Das Bild hing über der Tür, an der Wand.
Das Bild hing über der Tür und an der Wand.