How do you predict that market is near its top? Whether it’s a real estate, stock, commodity or any other market, there are certain events that happen right before it’s all over.

1. Everyone and his uncle

First ominous sign is when everyone is talking about it and doing it. Let’s go back to the stock market boom of the 1990s. By 1999 everybody seemed to own high tech stocks. Stock tips were a hot conversation topic. People were bragging about fortunes they made in stocks or at least they knew someone who did. Most of us remember that time. It happened right before high tech stocks collapsed in early 2000.

Many people developed an allergy to stock market, but next hot market was just around the corner. Yes, I am talking about real estate market of 2000s. It looked as if real estate prices would always go up. We all know what happened right before a crash. Everyone was buzzing about a real estate. People were buying properties they couldn’t really afford. Common public wisdom of the time was that you could always resell at higher price. Of course real estate advice and success stories were available in abundance.

2. Ridiculous prices and stupid financial decisions

Second way to predict that the end is near is to watch prices. The market is definitely overheated when prices reach unthinkable heights. For example, in many neighborhoods prices increased two or three fold between 2000 and 2005. Such insanity couldn’t last forever.

Irrational decision making is another bad indicator. Many investors borrowed heavily on margin, from credit cards and other sources to buy more stocks in 1990s. Recently a large number of real estate buyers financed their homes by taking very risky loans such as interest only and adjustable rate mortgages. If millions of people abandon financial caution and logic, the market is definitely in trouble.

3. Excessive media coverage

It’s natural for media to inform us about developments in various segments of economy. However it is a worrisome sign when coverage of a certain industry becomes excessive.

Let’s take a look at the following example. Almost every news program runs a story on a hot market. Front stands in bookstores and libraries feature latest books that explain how to make money in a booming industry. Major newspapers and magazines offer numerous articles with expert advice and success stories. Sounds familiar? Of course it does. Indeed it happens every time when particular market is near its peak.

4. Clueless people

Yet another strong sign of impending gloom is when increasing number of novices are entering the field.

Cousin Cal, who doesn’t know the difference between a common and preferred stock, is forming an investment club. Your coworker just made two successful transactions in stock market. He feels like an expert and offers to manage your portfolio for a fee. Convenience store owner from across the street sold his business and bought three hot investment properties in Florida. Never mind that he couldn’t spell real estate just a few years ago. Things like that happen when market is about to go over the hill.

Predicting market down fall isn’t the exact science. However events described in this article are good indicators of market collapse.