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This is one of the best 'tests' for real estate bubble identification I have found. It was sent to me by Paul Farrell, author of The Millionaire Code, Lazy Person's Guide to Investing, The Winning Portfolio and others.

He writes:

Look at each mini-bubble separately, think about the clues.

Give each a 1 to 5 point grade.

Total your score and send it to Paul .(paulbfarrell@charter.net) who is compiling a large scale look at potential real estate bubbles on our horizon:

1. Real estate bubble (5 pts)
   Clues: Speculators driving prices. Lenders offer cheap money, short-term loans. Home equity loans fund short-term spending. Fed chairman sees minimal froth.

2. Energy and oil bubble (5 pts)
   Clues: Crude hits another record. Political turmoil in oil-producing nations. Consumers buy gas-guzzlers at record pace. GM, Ford in trouble.

3. Foreign trade deficit (5 pts)
   Clues: Monthly deficits top $50 billion. This year’s deficit will beat 2004’s $617 billion. Foreigners now own $2.5 trillion of America.

4. Federal budget deficit (5 pts)
   Clues: Federal debt now $7.8 trillion; add another $400 federal deficit this year.

5. Corporate pensions under-funded (5 pts)
   Clues: Airlines, auto, other manufacturers heavily burdened, default to taxpayers.

6. Local government pensions deficits (5 pts)
   Clues: A near $400 billion mess draining local taxpayer resources.

7. Weak US dollar (5 pts)
   Clues: Fear China and other foreign powers will replace dollar reserves. Warren Buffett now betting $20 billion on foreign currency hedging.

8. Social Security deficit (5 pts)
   Clues: No choice, cut benefits or raise taxes; politicians hate both, so it’ll get worse.

9. Health care insurance costs (5 pts)
   Clues: Burden shifting to employees. Costs above inflation. 43 million uninsured.

10. Medicare deficit (5 pts)
    Clues: Going broke faster than Social Security. Prescription drug benefit added an unfunded $8.1 trillion. Long-term estimates over $36.6 trillion.

11. Personal savings shortfall (5 pts)
    Clues: We consume not save. National savings rate is zero, down from 8% two decades ago. Average household net worth less than $15,000, excluding home equity.

12. Consumer debt bubble (5 pts)
    Clues: We’re living beyond our means. Consumer debt at $2 trillion. At 13%, household interest as percent of income at all-time high. Personal bankruptcies rising.

13. War and military defense deficit (5 pts)
    Clues: Iraq and Afghanistan was costs over $200 billion a year, $2 trillion a decade.

14. Homeland insecurity (5 pts)
    Clues: Minimal legislation to protect ports and chemical plants. Federal budget even cut border patrol 90%. Vigilantes patrolling. We are vulnerable.

15. Class gap widening (5 pts)
    Clues: Superrich and CEOs getting increasing share of wealth, ownership and tax cuts.

16. Congressional pork-barrel (5 pts)
    Clues: Both parties act like teenage addicts on a spending spree with stolen credit cards. By not using the veto, the administration acts like a parent who needs Nanny 911.

17. International credibility (5 pts)
    Clues: Image problems: Post-9/11 imperialism, WMDs, Abu Ghraib, Gitmo and more.

18. Junk mailings (5 pts)
    Clues: Mail solicitations increasing for credit cards and hot stock newsletters.

19. New “Mad Money” cable show (5 pts)
    Clues: Frantic, manic entertainment; 1990s irrational exuberance again.

20. Numerous key mini-bubbles (5 pts)
    Environmental, resources, technology, educational, outsourcing, jobs, you pick!

Total your scores on these individual mini-bubbles.

If your total is 50 points or more, you're seeing a “MegaBubble” dead ahead. Prepare accordingly.

If you’re close to 100 points, consider a very conservative strategy. Most investors don't see bubbles when they’re in them. And if they do see, they act too late.

Send your scores to Paul to help create an aggregate of the collective mindset.