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Get ready for the New York real estate bubble to POP!

To put it mildly, the future is bleak for real estate. So, I'm going to stick with my theme that only fools and suckers should be buying homes these days. Unless, of course, you live in New York City!

Read MoreHomeowners: A new class of fools: Schoenberger

The NY real estate market is hot, hot, hot! Actually, it's so hot, developers can't build properties fast enough; the ones available for sale are being picked up faster than you can say "escrow."

Manhattan apartment buildings
Fotog | Getty Images
Manhattan apartment buildings

According to the second-quarter report from Douglas Elliman Real Estate, the average amount of days a property is on the market is 96, which is down 46 percent from a year ago. Oddly enough, however, the amount of properties available for sale increased by 18 percent year-over-year. In other words, demand is far exceeding supply at this point in Gotham, thus pushing property valuations higher and higher.

Read MoreMillennials are dragging down homeownership?

So, who are these buyers — fat cat Wall Streeters? Famous actors? Power forwards for the New York Knicks?

In fact, they're largely foreign buyers — particularly Chinese — thanks to affordability, increasing affluence and favorable exchange rates.

International purchases rose to $92.2 billion from $68.2 billion in the past year, according to the National Association of Realtors. The Chinese accounted for $22 billion of that, an increase of 19 percent from a year earlier — and most of those transactions took place in New York City.

Read MoreWealthy Chinese replace Russians as top apartment buyers in Manhattan

And just last week, Forbes reported that one of the developers of a new 380,000-square-foot tower in Midtown Manhattan "appears to represent anonymous mainland investors" that invested $62 million. Forbes also notes that it's the second "major undertaking" by a Chinese developer in the U.S. in recent weeks.

Asian investors haven't just been buying properties in Manhattan, they have also created buying sprees in London and Sydney. For example, due to high demand, values in London are up 20 percent and Sydney has witnessed appreciation of 15.4 percent — all in the past year. Oddly enough, though, prices have dropped 3.7 percent in Singapore and 0.6 percent in Hong Kong.

The governments of those two cities have been concerned for some time over potential property bubbles and affordability for the middle class, so they imposed measures including mortgage caps, taxes on property flippers and levies on foreign buyers as high as 15 percent.

And if you believe a free-market economy will prevent the U.S. federal government from doing the same, then I have a bridge to sell you.

Read MoreMillion-dollar homes: Summer vacation edition

Currently, there are measures in the United States to collect additional taxes from foreign persons who invests in U.S. real estate. The Foreign Investment in Real Property Tax Act (FIRPTA), otherwise known as Section 897, specifically says any gain recognized by a foreign person will be treated as if such gain were effectively connected to a U.S. trade or business. And the IRS collects an additional 10 percent of the purchase price accordance with Section 1445.

But guess what? There's a loophole! The IRS ruled that a foreign investor who enters into a total return swap that is tied to a broadly based U.S. real estate index will be exempt from FIRPTA. And this explains why so many shell corporations, as New York Magazine recently published in its "Stash Pads" article, are on public record as being the buyer, and not an individual name.

So what do you think is going to happen when this loophole closes, as expressed in whisper conversations by some on Capitol Hill? A real estate POP! like no other in what New Yorkers like to call, "The Greatest City in the World."

Commentary by Todd M. Schoenberger, president of J. Streicher Asset Management LLC. He also serves as portfolio manager of the LandColt Onshore and Offshore Funds. Follow him on Twitter @TMSchoenberger.

Disclosure: The LandColt Fund and J. Streicher Asset Management sometimes hold long and short positions in real estate, and only useETFs and mutual funds that mimic the Dow Jones Real Estate Index. Currently, the fund and Streicher hold no positions in real estate.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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