I can't wait to see where this one goes. The local real estate agent continues...

"You see, guys on Wall Street are angry. We've been taking all their business for five years. So now they're striking back. The Wall Street guys claim there's a housing bubble because they're after your money. They're trying to get your money out of real estate and back into stocks."

I laughed... on inside. And I knew I had to share this with you.

Conspiracy theories always seem to show up in financial markets. We've had them for years in gold and in stock market. I guess it's now real estate's turn. Today, I'll briefly show you why I think real estate is in danger, and what I'm doing with my own real estate dollars.

A Housing Bubble Conspiracy In Real Estate?

This local agent has seen what's happened here on Florida coast... Here's latest anecdotal evidence on purported housing bubble...

I had lunch with a friend today who bought a few acres here four years ago for $75,000. He told a realtor he'd take $465,000 for it, net, and realtor said he'd sell it. I was over at a friend's house yesterday. He lives in a relatively new neighborhood with about 25 homes close to beach. He probably bought it around 1999 and said he "has $180,000 in it." Another house in his same small neighborhood is for sale today - for $999,000. If my friend paid $180,000, then that house for sale today was likely less than $300,000 back in 1999. Now they're asking $999,000 - for a cookie cutter-house, in a cookie-cutter neighborhood, with nothing special about it.

It's a frenzy in Florida now. "Get in before you can't afford it anymore." That's name of game. Don't worry. Reality will assert itself...

Some "Real Facts" on Housing Bubble

So that's some anecdotal evidence. Now let's look at some housing bubble facts...

For hard evidence, Jim Grant reported some fascinating numbers in his latest issue of Grant's Interest Rate Observer. Jim says that from 1983 to 1998, housing sales stayed relatively constant, representing between 8% and 10% of GDP (the economy). Then things took off...

As of latest numbers, home sales as a percent of economy are at 17%. For statisticians out there, that's 3.4 standard deviations from mean. For non-statisticians out there, speculation in home buying is literally off charts. Said another way, it's not a Wall Street conspiracy that speculation in housing is at a statistical extreme; it's a fact.

Grant simply can't fathom speculation in housing. Grant brings up a point about this: He basically says if you buy a house hoping to flip it within a year, you're hoping for miracles... as you have to sell house at a profit of greater than 15% more than you paid for it, just to cover expenses incurred along way (commissions, property taxes, taxes on transaction, interest incurred from holding it a year, maintenance, etc.)

It's hard to be a short-term trader of real estate, when every flip has a 15% hole in bucket. But all over Florida these days, people are lining up to give it a try.