That's right, the next housing bubble is already in sight.

I was recently talking with a client of mine about the new construction home he bought in the last year, and we couldn't help but discuss the obvious… his new construction home is one of only a handful of recently built homes in his area. You've probably read it all over the news for a quite some time now, but new housing starts have been extremely low. It's a tough market to sell homes, and the high cost of construction and low prices have kept builders on the sidelines. This is particularly evident in the area of Seattle my client bought, and we both feel strongly about his ability to sell the home for a pretty penny in the not too distant future. The reasoning is simple; there will be very few newer homes to choose from.

My client is no slouch. He has a background in economics and makes intelligent financial decisions. He knows what happens when supply fails to meet a growing demand.

Another client of mine just bought a brand new home in Issaquah where the builder has seemingly had no problems getting offers on the homes in this development. Remember pre-sales? They're already happening again in desirable areas where growing families want that "brand new" home.

This is my firsthand experience of what the next bubble will be.

Macroeconomic Advisers, a consulting firm known to be one of the best economic forecasters, recently issued a report titled "The Long View on Housing - There's a Boom out There Somewhere," a summary of which can be found here. In their report they conclude that in order to keep up with demand, new housing starts "will need to rise sharply to average roughly 1.6 million units per year over the next decade." They say "rise sharply" because the new housing starts for the first quarter of 2011 came in at an annualized rate of 563,000. If you have been reading the news, then you have probably noticed that new housing starts have been down for quite a while now.

Macroeconomic Advisers' report comes to the 1.6 million conclusion based on current vacancy rates, demographic data, population growth, current housing trends, and historical data amongst others. Whether or not the 1.6 million turns out to be the exact number is irrelevant. What is relevant is that the writing is on the wall.

At some point when housing has taken the form of "normal," limited supply is going to start becoming an issue. Buyers are going to start trying to outbid other buyers. Prices are going to rise more dramatically than normal. People who wouldn't otherwise be buying are going to start jumping into the hot market. When this happens, you can bet your bottom dollar that builders are going to be all hands on deck.

Does all of this sound familiar? I thought so…

The good news is that we should know when it is upon us because we can see it coming. When that happens, please continue to make sound financial decisions for your family. Don't buy real estate because you think it will appreciate 15% allowing you to sell in a year (with no back up plans or contingencies if that doesn't happen). Consider liquidating some of your investment properties when prices are looking to be at their peak.

But most of all… DO NOT let greed control your decisions.

- Robert E. Wasser - Bellevue and Seattle real estate trends, statistics, news, and blog