If I had to choose the one topic I write about that results in the most varying feedback from readers, that topic would have to be real estate. We all have a genuine interest in knowing what the real estate market is doing not just because it affects our real estate investments, but because it helps us make decisions about our homes.

The value of a home might be a mute point since, regardless of its value, we all need a place to live. Yet, many of my readers are in situations where they are thinking about buying or selling a second or third vacation home; downsizing or upsizing their main home; or simply looking for property market direction.

I've personally been actively involved in the real estate investment market for about 20 years. My current opinion: housing prices are inflated. Courtesy of Fed Chairman Alan Greenspan, interest rates fell to a 46-year low and consumers borrowed aggressively to buy new homes, bigger homes, second and third homes. The theme became "what can my monthly payment afford?" as opposed to "what does it cost?" And with the stock market tech bubble bursting in 2000, where else were consumers to put their money anyway?

Now please, don't get me wrong. I do not expect prices to plummet here in North America. I just believe property prices here have topped out. And while every region is different, overbuilt areas will see property prices fall quickly if interest rates continue to rise.

In a report called "The U.S. Housing Bubble -- The Case for a Home-Brewed Hangover," HSBC basically says the U.S. housing market has become a bubble that will burst in mid- 2005, forcing the Fed to cut interest rates again.

"Prices are 10% to 20% too high and will take roughly five years to fall," said Ian Morris, Chief U.S. Economist at HSBC Securities U.S.A.

Morris makes these points:

-- Property prices are going through their longest stretch of gains on record. Since the stock market bubble burst in the first quarter of 2000, housing prices have risen 33% through the first quarter of 2004, with average prices up 70% in California, up 60% in New York, and up 50% in Florida.

-- Since 1958, recessions were almost always associated with real declines in house prices. But with the 2001 recession, property prices just soared.

-- People are too bullish on home prices: a survey in 2003 of recent home buyers in Los Angeles, Boston, and San Francisco showed an average expectation for home prices to rise 10% to 12% per annum for the next 10 years.

-- If we take away general inflation and use "square-foot-to- square-foot comparisons," home prices declined in 1975, 1979- 82, and 1989-1994.

-- Not only are home prices at record highs, but home prices are also at records in relation to income, rent, replacement cost, and home equity.

Morris believes it will only take six to eight quarter-point rate increases by the Fed to burst the bubble. That's because debt- service ratios are at record highs.

While I may not be as bearish on property prices as Morris, I'm bearish. On a recent Manhattan weekend outing, I noticed firsthand that properties are taking much longer to sell. An average apartment in Manhattan that sells for a million now takes four to six months to sell, compared to less than a month only a year ago.

If you believe there are too many people out there predicting there's a real estate bubble, don't let their caution give you comfort in respect to contrarian thinking. Do you recall how many stock market watchers were calling for the tech bubble to burst in 1999 (including yours truly), but how the caution was easily dismissed?

Property prices could collapse quickly, don't kid yourself. The median prices of homes in Sydney, Australia dropped 7.5% in the first quarter of this year -- and they dropped 12.9% in Melbourne, Australia. No major interest rate hikes there -- but look what happened. And if you've ever been to Sydney or Melbourne, you'd think they look just like American or Canadian cities, less the accents of their citizens.