With all the talk recently about a housing bubble, doesn’t it make you think? What is a housing bubble? And, are we in a bubble right now?

The first question is easily answered using Wikipedia, the free internet encyclopedia, that describes a housing bubble as “…a type of economic bubble that occurs periodically in local or global real estate markets.” It goes on to say that the “…rapid speculative increase in the valuations of real property followed by decreases can result in many owners holding negative equity." In other words, the price of housing increases rapidly then falls sharply, leaving behind opportunity for some and tragedy for others.

Are we in this so called bubble? That depends on who you talk to and what you read. For example, Mike Swanson wrote in a recent article in the WallStreet Window Newsletter that “Yes, there is a housing bubble!” In the March 12th edition of the Miami Herald.com, you’ll find an article titled “Real estate market sends mixed message on prices.” And, on March 17th, a RealtyTimes news article headline reads “Boom Not Over: Census Determines Fastest-growing Counties.” I think a large part of the country has experienced record growth in the housing market recently, but whether or not there is a bubble still depends on where you live.

So with all the conflicting reports, how do you know if your specific market is in a bubble? The quickest way to find out is to get to know your local market. Are news reports focused on recent substantial growth in your area? Have prices risen quickly?Are local realtors and investors talking about a seller’s market so strong that buyers are even willing to pay above the listing prices? Are there multiple offers at prices higher than the asking price for the same property? If you answered yes to these questions, then I would say your market is in a bubble.