No one will deny that southeastern Florida real estate is hot. Pre-existing home sales in Miami, Miami Beach and Fort Lauderdale have proven to be a good investment, outperforming since 2000 the S&P 500, a broad index of U.S. stocks. Miami housing prices are outpacing the top 20 metropolitan areas and the nation as a whole, according to the National Association of Realtors, a U.S. industry association.

During the past three years alone, home prices rose 92% in Miami-Fort Lauderdale. Among the top 20 city areas, home values rose 79%, while the nation aver aged 32%. A home in southeastern Florida worth $145,000 in 2000 was worth $371,600 five years later, according to the realtors.

That doesn't include the red-hot presale market, which attracts speculators like moths to a flame. In the City of Miami alone, not including Miami Beach, 63,776 residential and condo units have been approved or are in some preliminary development phase. During the past 10 years, comparatively, just 9,250 units were completed.

Given these figures, few who live here or have visited can escape idle talk of a bubble. Yet realtors are standing firm: They say the market won't collapse at all. Prices will cool off a bit, they argue, but are likely to stay on the rise for the long term. That's because many buyers are Latin Americans investing in second homes, not speculating, says Gustavo Lumer, a Miami real-estate broker who caters to Latin American buyers, especially from Argentina and Uruguay.

Part of the picture, too, is rich European buyers looking for a bit of sun with their investing. Real housing prices increased in the United States by 27% from 1995 to 2002, according to the Economist magazine's index of world home values. That's far less appreciation than in countries like Spain, up 58%, or Britian, up 89%.

U.S. baby boomers on the cusp of retirement also likely will continue to head toward sunny climes. According to the U.S. Census Bureau, Florida will overtake New York and become the third most-populous state in the country by 2030, when the population will have jumped by 80% to 29 million. In fact, Florida, Texas and California alone will account for one-half of the total U.S. population in just 25 years, according to the government. Surely all those people are going to need a place to hang their hats. "That by itself will keep the prices going up and up," says Lumer.

With any bull market, though, corrections are inevitable, and that is perhaps already going on. In November 2005, national new-home sales fell by 11.3% from the previous month, the sharpest drop in 12 years--although October was the hottest month in years at 1.4 million homes sold. By the time 2005 final numbers come in, the market still will be healthy, according to the U.S. Commerce Department. Real-estate lawyer Jean-Charles Dibbs, at Shutts & Bowen in Miami, says he has seen clients from Latin America act with a tittle more caution these days. They are asking for more due diligence, for instance, on the developers of projects in which they are considering investing. "They are still buying, but they might purchase two or three properties these days instead of four or five," Dibbs says.

Recession. Whether or not Miami grows, the U.S. economy will enter a recession sometime between 2008 and 2011, says John Calverley, chief economist and strategist for American Express Bank. A growing oversupply of housing coming on top of a shrinking economy could exacerbate that recession, making it as severe as the one in 1990 and dwarfing the economic slowdown of 2002. One thing is clear: Supply is growing. Home inventories in November rose 1.2% from October to a 19-year high to 2.90 million homes for sale, according to the U.S. realtors group.