LAST week my friends finally closed on their property sale. The flat is a tiny, fifth-floor walk-up (no lift) “two bedroom” apartment close to Union Square in Manhattan. It does have “outside space”, a favourite phrase of American real estate agents, in the form of a roof garden. But you can’t live on the roof and the flat is, as I said, tiny.

The bedrooms are bigger at the Tenement Museum on the Lower East Side — a restored house that is supposed to show us how hard life was in the old days for New York’s immigrants.

If a modern landlord got hold of that building, he’d probably chop all the rooms in half again and cram twice as many New York University students in to the space as there were immigrants. And he’d charge 1,000 times the money.

My friends bought their flat about five years ago for about $500,000 (€414,000) and sold it, I think, for more than $1.2m. With the money the couple are doing the American version of The Good Life — moving to Hawaii to run a coffee plantation. Perhaps coffee is the new property.

When I moved to New York four years ago I was struck by how little people talked about house prices. In London and Dublin it usually takes all of 10 minutes for someone to tell you how well they have done with their property. Or conversely how prices are about to crash.

Not unlike Paris, more people rent here and buy somewhere outside the city to escape to at weekends. So rent was a bigger topic than property prices.

But in the last two years there has been a notable shift. With the stock markets still a pariah and interest rates so low, property became the new speculative asset class.

I now live in Williamsburg, a horrifically trendy part of Brooklyn. I moved here because it was cheaper, slightly, than where I lived in Manhattan. Now warehouse properties here are selling for as much as flats in Tribeca. Prices are even going through the roof in Bed-Stuy, a horrible and inconvenient area of Brooklyn with some lovely buildings and a nasty crack habit.

The property fetish has even reached South Bronx, once the scariest part of New York City and scene for the opening clash between rich and poor in Tom Wolfe’s Bonfire of the Vanities. South Bronx is now, inevitably, being called SoBro and is home to artists, writers and restaurants selling rocket and pear salads.

New York isn’t America. New areas become the new hip neighbourhood at a pace that makes changes in the property market look glacial in the rest of the country. But the pace of change seems extraordinary at a time when so many people are predicting the housing “bubble” is just about to burst.

Average national home prices haven’t dropped since the Great Depression, when the unemployment rate reached 25%, or five times today’s level.

But there has never been a run-up in home prices to match this one. American home prices have in the past moved roughly in line with the overall rate of inflation. In the past seven years, they’ve outpaced the rate of inflation by 60%.

Dean Baker, economist and co-director of the Centre for Economic & Policy Research, recently told Business Week that he thought the market was now in bubble mentality. Baker compared housing to the high-tech Nasdaq stock market just before it crashed.

“You see the fastest increases just before the collapse. If you look at the past, the Nasdaq crossed 4,000 around the new year in 2000, and then two months later, it had already crossed 5,000. Suddenly in mid-March, the Nasdaq plunged 15%, and it was downhill from there,” he said.