Is the housing bubble about
to burst?

NEW YORK - Ada de Varona describes herself as a full-time school teacher and a part-time real estate investor. 

“In the last two years, I've turned over six properties,” she says.

This single mom buys not to own, but to sell at a quick profit — a process called “flipping.”  It’s a growing practice in hot markets, like Miami, where speculators are cashing in on the tremendous run-up in prices.

“There's no guarantees in life," says de Varona. “But I've never lost money. I've always made money. The least I've made on a property is $20,000.”

Such enthusiasm sounds eerily familiar to Yale professor Robert Shiller, the author of “Irrational Exuberance.” He thinks today's housing market looks a lot like the stock market of the late 1990s, before the tech bubble burst.

“A bubble is a time when people stretch to pay more than they otherwise would, because they have grand expectations for future price increases,” says Shiller.

Real estate is a national obsession — dominating the headlines, book store shelves, and even cable TV — all showing you ways to redesign your home for maximum profit.

“That's what we saw with the dot-com bubble,” says Shiller. “The problem is that when you have this extraordinary fixation of national attention on a market, it can cause a spiking of the market, and then a reversal.”

The first sign of a slowdown, economists say, will be rising mortgage rates. They could hurt homeowners using increasingly popular interest-only loans that start with low, but adjustable rates.

“The payment shock could be quite significant,” says Dr. Mark Zandi, the chief economist for Economy.com. “They may not have the income to service that mortgage and could default. And that particularly is a problem if housing prices indeed go flat or begin to decline.”

Still, Ada de Varona isn't worried.

“My real estate investing is making a lot more money than my stocks,” she says.

She’s confident she can build her nest egg before the bubble springs a leak.

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