An article by By Mark Hulbert of MarketWatch titled Can it be a bubble if many recognize it as such? wrote a great article titled “Are bubbles only seen in retrospect?” based on research by

Professor Robert Schiller, the author of Irrational Exuberance which predicted the NASDAQ market correction and his recent book Irrational Exuberance: Second Edition which discusses the housing boom.

Professor Robert Schiller, who I admire greatly for his insight on the housing market and for whom I got to meet in the green room at the taping of CNBC Town Hall: The Real Estate Boom [Note: WM Clip] basically says that we are not protected from a housing bubble simply because people are worried we are in one.

>He defines a bubble as “a market situation in which news of price increases spurs
>investor enthusiasm which spreads by psychological contagion from person to
>person, bringing in a larger and larger class of investors, who, despite doubts about
>fundamental value, are drawn to the investment partly through envy of others’
>successes and partly through a gambler’s excitement.”