China's bubble

China's bubble also was fueled largely by cheap credit. Unlike the U.S., though, China has dodged a crash in home prices -- so far.

Three years ago, the central government began raising interest rates to calm home sales. It tightened requirements for down payments and mortgages, and it limited how many homes a family could buy. The result: Home prices nationally have dropped slowly. It's too soon to know if the retreat will continue to be manageable. Recently, the People's Bank of China retreated from its tough stance in order to tickle the weakening economy.

There's also a wild card: local bubbles in cities such as Beijing, Shenzhen and Guangzhou. There, prices are rising, and competing buyers line up outside sales offices. Chinese have few legal options besides real estate for investing their money, which fuels a buying frenzy.

The centrally run economy allows China to directly exert control. "When the Chinese government feels the sector is overheating, it can take mitigating action more easily than most other countries," says the Wharton School's Hoek-Smit.

But the central government does not have complete control. Local governments get a lot of revenue from owning and selling land to developers. Many cities are still raising land prices and selling to developers.

"They may be able to not have a major crash," Hoek-Smit says. But with home construction so important, as in the U.S., a housing slowdown will affect the national economy. Already, developer bankruptcies are hurting banks. "It's an enormous country," Hoek-Smit adds. "Different areas will be impacted differently."

What happened in Brazil

While cheap credit was inflating the U.S. bubble by 2003 or 2004, Brazil's housing market stayed normal until 2009, says Hoek-Smit. But then, Brazil, worried by the U.S. financial panic of 2008-09, created programs to stimulate its economy by subsidizing the building of 3 million low- and lower-middle-income homes. When the economy overheated, Brazil, like the U.S., failed to act quickly to slow the growth.

Brazil's expansion, like China's, helped raise a developing nation's living standard and put many poor families in decent homes. But the price of overdevelopment is now clear. A spring report by Capital Economics, an economic research company, estimates Brazilian real estate to be overvalued by as much as 50%. Prices have tripled in Rio de Janeiro and doubled in São Paolo since 2008.

House prices are "out of all proportion" to incomes and rents -- classic tip-offs to a bubble. Brazil's boom appears to have peaked in July 2011, says Global Property Guide publisher Matthew Montagu-Pollock.

Last year, 9 million Brazilians took out loans for the first time, Ricardo Loureiro, the president of credit company Experian's Latin American arm, Experian Serasa, told a Brazilian business magazine.

Vacancies are appearing even in Brazil's subsidized lower-income housing sector, a sign of subsiding demand. Rather than discourage lending, the government made credit easier, allowing 35-year mortgage terms to let even more lower-income people afford payments.