New evidence emerges for caution in at least part of the real-estate market. What do you think?

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A month ago, I examined the evidence that Seattle’s residential real-estate market might be in a bubble, based on my experience in calling the 2007-08 event. My cautious answer was, “Not yet.”

Skyrocketing prices alone, although no fun for buyers, don’t constitute classic bubble behavior. You need large numbers of speculators buying — especially with overextended debt — based solely on the expectation of a continued price rise at today’s velocity. You also need lots of spec building. Neither seemed to be happening in either the city or metro area.

Overbuilding isn’t necessarily a bubble, either. The classic expression, “How did I make a million dollars in real estate? I started with ten million,” is rooted in truth. Apartments and perhaps offices are at risk of overbuilding, although they are also driven by real demand.

Demand is based on a strong, diverse economy. Other causes: Seattle is less expensive than the Bay Area, has relatively high population growth, low levels of single-family construction in the metro and limited land and single-family inventory in the city.

Anyway, we regularly see real-estate downturns and even sectoral recessions that clean out the bad bets and allow for space to aim toward equilibrium. Then the cycle begins again.

Now comes a story from my colleague Mike Rosenberg reporting, “People are now reserving condos under construction and then flipping them for a six-figure profit before they even open.”

That’s a classic bubble “tell.”

It’s fairly common for speculators to buy condos under construction and resell them without ever occupying the unit. The warning sign is the high premium they are receiving on resale. That encourages more speculation. It also leaves buyers paying peak prices that might not reflect the long-term value of the property — or their financial capabilities.

One data point in one sector of residential real estate does not a broad trend prove. But in this case, a bubble in condos could be forming that could hurt people, if not bring down the economy. Finally, a big question remains about the amount of Chinese and other Asian money in the market, as in Vancouver, B.C., which distorts prices and could pull out quickly.

What do you think?

Today’s Econ Haiku:

It was hot last month

In U.S. job creation

Wages stay chilly